Answer:
Rafael and Lucy's credit for retirement plan contributions is $570.
Explanation:
The Saver's Credit is a tax credit for low and moderate-income taxpayers who make contributions to a retirement plan. The credit is worth between 10% and 50% of the taxpayer's contributions, up to a maximum credit of $1,000 ($2,000 for married taxpayers filing jointly).
To determine the credit amount, we need to calculate the taxpayers' adjusted gross income (AGI) and their credit rate.
For the tax year in question, the AGI is $40,500 and the contribution limit is $2,850 per person. The total contribution amount is $2,850 x 2 = $5,700.
The credit rate is determined by the taxpayer's AGI and filing status, as follows:
For AGI up to $19,750 for married taxpayers filing jointly, the credit rate is 50%.
For AGI between $19,750 and $32,000 for married taxpayers filing jointly, the credit rate is 20%.
For AGI between $32,000 and $40,000 for married taxpayers filing jointly, the credit rate is 10%.
For AGI above $40,000 for married taxpayers filing jointly, the credit is not available.
Since the taxpayers' AGI is $40,500, the credit rate is 10%. The credit amount is calculated as follows:
Credit amount = Credit rate x Contribution amount
Credit amount = 10% x $5,700 = $570
So, Rafael and Lucy's credit for retirement plan contributions is $570.