Retirement Savings Contributions Credit or Saver's Credit
Do you make contributions to a retirement plan? In addition to deducting the amount of your qualified contributions, you may be able to claim an additional credit for those same retirement contributions. The Saver's Credit (also known as the Qualified 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 the Saver's Credit is based on how much money 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).
When you prepare your tax return on eFile.com, we will calculate the exact amount of your credit for you.
Retirement Plans That Qualify for the Saver's Credit
You can claim the tax credit for contributing to any of the following retirement plans:
- Traditional IRA
- Roth IRA
- 401(k) plan
- 403(b) annuity (including voluntary after-tax contributions)
- 501(c)(18) plan
- 457 (Governmental) plan
- SIMPLE IRA
- SIMPLE 401(k) plan
Saver's Credit Qualifications
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 5 or more months of the year.
- Your income for 2018 must not be more than $31,500 if Single or Married Filing Separately (for 2019 the income must not be more than $32,000), $47,250 if filing as Head of Household (for 2019 it is $48,000), or $63,000 if Married Filing Jointly (for 2019 it is $64,000).
- 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.
Other 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 nontaxable. In 2018, you can contribute to a Roth IRA if your modified adjusted gross income is less than $135,000 ($199,000 if married filing jointly). In 2019, you can contribute to a Roth IRA if your modified adjusted gross income is less than $137,000 ($203,000 if married filing jointly). However, if your modified AGI is between $120,000 and $135,000 ($189,000 and $199,000 if married filing jointly), your maximum contribution to a Roth will be phased out (reduced). For 2019, if your modified AGI is between $122,000 and $137,000 ($193,000 and $203,000 if married filing jointly), your maximum contribution to a Roth will be phased out (reduced). Learn more about the tax benefits of Traditional and Roth IRAs in Publication 590 - Individual Retirement Arrangements.
- ABLE Contributions - Starting with 2018 Tax Returns, you can use part or all of your Achieving a Better Life (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 from 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.
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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