Retirement Savings Contributions Credit

• Some teachers may qualify for the Retirement Savings Contributions Credit. Single filers with an adjusted gross income up to $27,750 qualify for a credit equal to 10 to 50 percent of their personal retirement contributions. Teachers filing as Head of Household with an adjusted gross income up to $41,625 and married filers with an adjusted gross income up to $55,500 also qualify for a credit equal to 10 to 50 percent of their contributions. The credit is higher for those with lower incomes and lower for those with higher incomes.
  
  

Individual Retirement Accounts

• Teachers who have individual retirement accounts in addition to their state retirement program can deduct up to $5,000 for contributions made to their IRA account. To deduct contributions for the tax year, contributions must be made by the following April tax day. You must also make all contributions before filing your taxes for the year.
  
  

Payroll Deduction Benefits

• Teacher retirement plans typically collect contributions through a pre-tax payroll deduction. These contributions will reduce your taxable income, which will in turn reduce the amount of tax you owe each year. So, even if you cannot write off these contributions because of excessive income, you will still receive some tax benefits since you will be lowering the amount of your income that is subject to state and federal taxes.
  
  

Early Withdrawls

• Alternatively, early withdrawals will likely increase your taxes. Any retirement funds withdrawn from your retirement account before the age of 59 1/2 are subject to a 10 percent tax. Exceptions to this tax are numerous, so carefully examine your situation to determine if you will have to pay taxes on the retirement withdrawal. For example, you will not have to pay taxes on your early withdrawal if you have medical expenses that exceed 7.5 percent of your income or if you are disabled.