What is the Saver’s Credit?
The Retirement Savings Contributions Credit, more commonly known as the Saver’s Credit, is a valuable tax credit designed to help low- and moderate-income taxpayers save for retirement. It essentially rewards you for contributing to an eligible retirement account. Unlike a deduction, which lowers your taxable income, a credit directly reduces the amount of tax you owe. The maximum credit is $1,000 for individuals and $2,000 for married couples filing jointly.
Who is Eligible for the Saver’s Credit?
To qualify for this credit, you must meet a few specific requirements:
- Age: You must be age 18 or older.
- Student Status: You cannot have been a full-time student during any part of five calendar months of the tax year.
- Dependency Status: You cannot be claimed as a dependent on someone else’s tax return.
Saver’s Credit Income Limits
Your eligibility also depends on your adjusted gross income (AGI). The AGI limits are adjusted annually for inflation. For the 2024 tax year (the return you file in 2025), the AGI limits are:
- Married Filing Jointly: up to $76,500
- Heads of Household: up to $57,375
- All Other Filers (Single, Married Filing Separately): up to $38,250
How is the Credit Calculated?
The amount of your credit is a percentage (50%, 20%, or 10%) of the first $2,000 you contribute to a retirement account ($4,000 if married filing jointly). The percentage depends on your filing status and AGI. Note that distributions from a retirement or ABLE account can reduce the contribution amount used for this calculation.
Which Contributions Qualify?
Contributions to the following types of retirement accounts are eligible:
- Traditional and Roth IRAs
- 401(k), 403(b), governmental 457(b), or Thrift Savings Plan (TSP)
- Contributions to an Achieving a Better Life Experience (ABLE) account if you are the designated beneficiary.
The deadline for contributions to an IRA for a given tax year is typically April 15 of the following year. However, contributions to a workplace plan like a 401(k) must be made by December 31.
How to Claim the Saver’s Credit
To claim the credit, you must file Form 8880, Credit for Qualified Retirement Savings Contributions, with your federal tax return.
