Saver's Credit - Retirement Savings Contributions Credit

The Saver's Credit - Save for Retirement

Do you make contributions to a retirement plan? The Saver's Credit, formerly known as The Retirement Savings Contributions Credit, was designed to help middle-income families save for the future. The Saver's Credit may allow you to reduce your income tax dollar-for-dollar by up to $1,000 ($2,000 for married filing jointly).

The exact amount of your Saver's Credit is based on how much you contributed and what percentage of your contributions qualify. This percentage, or credit rate, of 10%, 20%, or 50%, is determined by your adjusted gross income and your filing status. The credit is non-refundable, so it will reduce the taxes you may owe, but you will not see it in your tax refund. The maximum contribution used to calculate the amount of the Saver's Credit is $2,000 per person (so $4,000 if filing jointly).

The efile.com tax software will calculate the exact amount of your credit for you; but, if you wish to figure out the exact amount for which you qualify, you can use federal tax Form 8880, Credit for Qualified Retirement Savings Contributions.

What Plans Qualify for the Saver's Credit?

• Traditional IRA
• Roth IRA
• 401(k) plan
• 403(b) annuity (including voluntary after-tax contributions)
• 501(c)(18) plan
• Governmental 457 plan
• SEP
• SIMPLE IRA
• SIMPLE 401(k) plan

Do You Qualify for the Saver's Tax 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 5 or more months out of the year.
• Your income for the year must not be over $27,750 if single, $41,625 if filing as head of household, or $55,500 if married filing jointly.
• 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.

Retirement Contributions - Other Tax Benefits

Even if you take the Saver's Credit, you can still make itemized deductions on your tax return for qualified retirement contributions. 

Whether or not you qualify for the Saver's Credit, you might consider making your contributions (or rolling your Traditional IRA over) to a Roth IRA. Contributions to a Roth IRA are not tax-deductible, 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 also be nontaxable.

Learn more about the Saver's Credit from the informational pamphlet Publication 4703, Retirement Savings Contributions Credit.

Learn more about the tax benefits of Traditional and Roth IRAs in Publication 590, Individual Retirement Arrangements.