Senate Finance Chairman Ron Wyden (D-Ore) has introduced retirement legislation that, in part, retools the existing saver’s credit.
The “Encouraging Americans to Save Act” would reform the existing tax credit into a refundable, federal matching contribution for middle and low income working Americans who contribute to a retirement savings account.
If enacted, the bill would replace the current saver’s credit with a 50% government match on contributions of up to $2,000 per year made to 401(k)-type plans and IRAs by individuals with income up to $32,500 and couples with income up to $65,000. Under current law, the maximum credit is $1,000 per individual.
It would also provide a temporary coronavirus recovery bonus credit that would be in effect for taxable years beginning after December 31, 2022, and before January 1, 2028.
This credit would be an additional 50% credit on the first $10,000 in retirement savings made during the five-year period beginning in 2023. The maximum additional credit would be up to $5,000 and would apply to the aforementioned income levels.
The bill would also enable taxpayers to fund an IRA using his or her tax refund. The contribution would be applied to the tax year that is the subject of the return.
Wyden’s bill is the companion to legislation that the House Ways and Means Committee approved in May, the “Securing a Strong Retirement Act of 2021.” The full House has yet to vote on this legislation.
The House legislation is more comprehensive than Wyden’s bill, and the differences between these bills would need to be ironed out before passing Congress. That being said, it is not clear when the chambers will act on their respective bills.
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