Retirement Contributions Credit or Saver's Credit

What Is the Saver's Credit?

In addition to deducting the amount of your qualified contributions, you may be able to claim a tax credit if you make retirement contributions. The Saver's Credit, also known as the Credit for Qualified Retirement Savings Contributions, was designed to help incomes in the lower to middle range.

Taxpayers with retirement plans have until December 31 to make qualifying retirement contributions and get the Saver’s Credit on their 2023 year tax return.

What Retirement Plans Count?

Elective deferrals or contributions to workplace related retirement plans must be made by December 31 to a:

• Traditional IRA; Roth IRA; SIMPLE IRA
• 401(k) plan; SIMPLE 401(k) plan; 403(b) annuity (including voluntary after-tax contributions); 501(c)(18) plan; 457 (Governmental) plan
• Simplified Employee Pension or SEP
• Thrift Savings Plan (TSP) for federal employees.
• Achieving a Better Life Experience or ABLE accounts.

For details see the instructions on IRS Form 8880, Credit for Qualified Retirement Savings Contributions, for a list of qualifying workplace retirement plans and additional details.

How Much Is the Saver's Credit Worth?

The Saver's Credit can reduce your income tax dollar-for-dollar by up to $1,000 or $2,000 for married filing jointly. The exact credit amount depends on your contributions and your AGI and filing status, with rates of 10%, 20%, or 50% - see the rates by year below.

This non-refundable tax credit only reduces taxes owed and does not increase your tax refund. The maximum contribution is $2,000 per person or $4,000 for couples filing jointly, with up to 50% considered for the credit.

Example: A single taxpayer with an $18,000 income who contributed $2,000 can claim a $1,000 credit (50% of their contribution) against a $500 tax liability, reducing it to $0.

To see if you qualify, sign up for a free eFile.com account. We’ll automatically calculate and apply the credit on IRS Tax Form 8880 - eFileIT.

See also: Tax Guide for Retirees and IRS Publication 590-A, Individual Retirement Arrangement Contributions.

What Are the 2024 Saver's Credit Rates?

The Saver's Credit rates below apply for 2024. Wondering who qualifies for the Saver's Credit? When you prepare your taxes via the eFile.com Tax App, you can be certain to have the right rates calculated and applied for your return. e-File your federal and state taxes by the April IRS tax deadline and estimate your taxes with this free tax calculator.

The 2024 income limit for the Saver's Credit is $38,250 for singles and married filing separately; $57,375 for heads of household; and $76,500 for married filing jointly. The tax year 2025 Saver’s Credit (also known as the Retirement Savings Contributions Credit) income limit is $79,000 for married couples filing married jointly, $59,250 for heads of household, and $39,500 for singles and individuals filing married filing separately.

^* MFS: Married Filing Separate. MFJ: Married Filing Joint.

Example: a couple contributed $1,000 to a retirement account and is filing taxes jointly. If their adjusted gross income (AGI) is $50,000, they receive a Saver's Tax Credit of 10%, totaling $100. If their AGI is $35,000, the credit increases to 50%, amounting to $500. Each spouse’s contribution qualifies for the credit, so if each contributes $2,000 and qualifies for the 50% credit, they will save $1,000 each, totaling $2,000 in tax savings. Remember that the Saver's Tax Credit is a non-refundable tax credit.

Who is Eligible for the Saver's Tax Credit?

You must meet the following requirements in order to qualify for the Saver's Credit:

• You must be at least 18 years old and not claimed as a dependent on someone else's tax return.
• You cannot be a full-time student or have been one for five or more months of the year.

Rollover contributions do not add to or qualify for the credit. When calculating the credit, you must deduct, from the contributions you have made, the amount of any retirement plan or annuity distributions you received in the current tax year and in the previous two tax years. Also, note that foreign income cannot be included in your adjusted gross income for the purposes of calculating this credit. The eFile Tax App calculates all of this for you.

If you made retirement contributions and you prepare and e-file your current year federal and state tax returns via eFile.com, you can be assured that the correct Saver's Credit rates are applied to your tax return(s) and the correct tax forms and schedules are used. You can start free at eFile.com and see the benefits of electronic tax preparation and e-filing.

What Are the Tax Benefits for Retirement Contributions?

• Deduction for IRA Contributions: Even if you get the Saver's Credit, you can still make deductions on your tax return for qualified retirement contributions. The deduction for IRA contributions is an above-the-line deduction, which means that you do not have to itemize deductions to claim it. You can generally deduct the full amount of your qualified contributions up to your contribution limits for the year.
• Contribute to a Roth IRA: Whether or not you qualify for the Saver's Credit, you might consider making your contributions to a Roth IRA. You can also rollover your Traditional 401(k) or Governmental 457(b) plan into a Roth account. Contributions to a Roth IRA are taxable, but you can count your contributions toward the Saver's Credit. The biggest benefit of a Roth IRA is the fact that any capital gains it earns will be tax-free, and your post-retirement distributions will generally be non-taxable. Learn more about the tax benefits of Traditional and Roth IRAs in IRS Publication 590 - Individual Retirement Arrangements.
• ABLE Contributions: For 2018 and later returns, you can use part or all of your Achieving a Better Life Experience (ABLE) account contributions to claim the Saver's Credit if you are the designated beneficiary (eligible person with a disability) and you work. However, rollover contributions from another ABLE account or a Qualified Tuition Plan (QTP) account do not qualify for the credit. In addition, any eligible contributions may be reduced by any recent distributions you received from your ABLE account. For more details see Publication 907 for Persons with Disabilities.

What were the Saver's Credit Rates for 2023?

The rates below apply to 2023 income and may be used for filing back taxes.

^* MFS: Married Filing Separate. MFJ: Married Filing Joint.

What Are the 2022 Saver's Credit Rates?

The rates below apply for the previous year or back taxes for Tax Year 2022. These can be used for informational purposes; plan your tax return each year that way, you can eFileIT on eFile.com in the year it's due - you don't have to handle any complicated forms!

^* MFS: Married Filing Separate. MFJ: Married Filing Joint.

What Are the 2021 Saver's Credit Rates?

The rates below apply for the previous year or back taxes for Tax Year 2021. These can be used for informational purposes; plan your tax return each year that way, you can eFileIT on eFile.com in the Tax Season it's due - don't handle any complicated forms!

What Are the 2020 Saver's Credit Rates?

Use the latest tax calculator and avoid tax surprises!

Related Information on Retirement Income and Tax Credits

• Tax Benefits of Retirement Plans
• Minimum Distribution Limits for Retirement Income
• Retirement Plan Contribution Limits
• Taxable Social Security Benefits
• Tax Penalties for Early Withdrawal of Retirement Benefits
• Maximum Pension Plan Contribution Limits
• IRS Publication 907, Tax Highlights for Persons with Disabilities.

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