Get extra tax credit

The people most likely to know about an income-tax break are the ones most likely to use it, right? Not necessarily, at least when it comes to the Saver’s Credit.

This tax break, also known as the Retirement Savings Contributions Credit, provides money for lower-income Americans who invest in IRAs or workplace retirement programs such as 401(k) plans. The break is worth up to $1,000 a year for singles and $2,000 for married couples in the lowest-income ranges.

Relatively few Americans, roughly one in three, are familiar with the credit, according to a report by the Transamerica Center for Retirement Studies. But that drops to one-quarter of people in certain traditionally disadvantaged groups — women, lower-income workers (household income below $50,000) and less-educated Americans (highschool education or less).

The credit is in addition to other tax deductions or employer matching funds that might be available. “Because this double benefit sounds too good to be true, many eligible savers may be actually confusing the two incentives,” said Catherine Collinson, president of the Transamerica Center. “For (workers) who are not already saving, the Saver’s Credit could be a nudge to get them started, if only they knew about it.”

Eligibility presents another barrier. The credit is available only to those workers with incomes not exceeding $30,750 (singles) or $61,500 (couples) for 2016, with slightly higher amounts for 2017. It isn’t available to full-time students, dependents or people under 18.

Don’t max out your credit

Credit scores have been rising in recent years, as the economy slowly improves, with more people getting out of debt and fewer sliding into delinquencies. Also, credit scoring has become more transparent, with more people recognizing that good scores can result in better borrowing opportunities, at lower costs. Still, confusion about credit scores persist.

Capital One cited several of these in a recent report. They include the myths that people seeking high scores should closed unused card accounts. Another is that people shouldn’t monitor their own scores often.

In fact, the average age of credit accounts is a significant part of the scoring equation, so it can be smart to retain your oldest card, even if you don’t use it much, Capital One said. As for checking credit scores, “hard” inquiries from prospective lenders, triggered by a consumer’s application for credit, can cause a temporary dip in a person’s score, but a consumer’s monitoring of scores won’t.

Another area of confusion focuses on whether people should maintain a creditcard balance to jack up their scores. No, said Capital One: Everyone should strive to pay off balances in full.

Credit-bureau Experian, in its own report, discussed the related topic of a person’s credit “utilization rate.” This reflects the current balance on a card divided by the credit limit — for example, $10,000 in charges on a card with a $30,000 limit. “You don’t want your total credit-card balances to be more than 30 percent of your total credit-card limits, and you don’t want any one card to have a balance of more than 30 percent,” Experian said. The lower the utilization rate, the better. Consumers with the highest scores have utilization rates below 10 percent.