Public Employee Press

Tax saving tips for city employees

Are you paying too much in taxes? With Congress and President Bush handing another huge tax bonanza to the wealthy, what can the ordinary working person do?

Actually, some options save taxes on money you are probably spending already. And most DC 37 members are eligible.

• Try the Transit Debit Card, which can save you money getting to work, or the Medical Flexible Spending Account, to save on non-reimbursed medical costs, or the Dependent Care Account, for savings on caring for young or old dependents.
  
  
• See if you are eligible for a 401(k) account, a 403(b) or a 457; they build retirement savings with pre-tax dollars.
  
  
• Look into the Retirement Savings Tax Credit (called the “Saver’s Credit”). It rewards lower-wage earners who can save for retirement by letting them reap the rewards of retirement thrift earlier. Claim it on either the 1040 or 1040A.

  Since the Saver’s Credit is a credit, not a deduction, it’s a better deal. Deductions cut your taxable income, but credits directly reduce your taxes, dollar-for-dollar. If you owe $500 in taxes and get a $250 credit, you only owe $250.
  
  The Savers Credit can be up to $1,000 — or $2,000 for a couple filing a joint return — depending on income, tax status and how much you put into an IRA or 401(k)-type deferred compensation plan.
  
  You can get the forms you need from the payroll office at your agency.

For more information on tax savings options, ask your accountant or tax preparer or research the Retirement Savings Tax Credit on the Internet.