By Matt Murren
There is an easy way for you to save for your retirement and at the same time get pension tax relief from the federal government. The government wants you to build up your nest egg and helps you by granting you some tax relief on your contributions to a pension program. While your pension increases, your total tax bill is lessened by government tax relief programs.
The Internal Revenue Service (IRS) allows any amount saved for retirement to be protected, which in turn, relieves the tax burden. If you are currently retired, then you will have to pay taxes on anything you earn through your investments. However, if you are still working, you can contribute to your pension plan and defer the taxes. You will only pay taxes on the amount your withdraw later.
You will be required to pay tax on your pension if you receive it via early retirement. But, you do have the option of rolling all or part of it over to an Individual Retirement Account (IRA) or a qualified retirement plan and any tax will be deferred until later.
If you are 65 years old or older, you can get a tax credit of 15 percent of your income up to the federal income tax amount. This tax credit is yours if your adjusted gross income, your nontaxable pension benefits and Social Security benefits are within a certain pre-established limit.
You may be retired but still working either full- or part-time. If so, the federal government will give you a tax credit on the money you earn during this time. This federal program protects some of your earnings, especially if you are a low-income tax payer. This will help you live on the income you projected you would need during your retirement years.
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