What is a Retirement Savings Contributions Credit?
The Retirement Savings Contributions Credit, also called the Saver's Credit, is a tax break for people with middle to lower incomes who save money in retirement plans. You can get up to 50% off your contributions.
by S Samayanka
Updated Apr 09, 2024
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What is a Retirement Savings Contributions Credit?
The retirement savings contributions credit, also known as the saver's credit, is a non-refundable tax credit for taxpayers who get qualified retirement plans. It is for helpful people with middle- to lower-class incomes.
Depending on your level of income, you can claim up to 50% of your qualifying retirement contributions made to your employer. When contributing to a tax-advantaged retirement plan, such as a 401(k), eligible taxpayers can claim both the credit and the tax deduction.
How to Claim the Retirement Savings Contributions Credit?
To claim the Retirement Savings Contributions Credit
- You must have contributed to the eligible retirement account for the tax year.
- People who save using plans like 401(k) have time until the end of the calendar year.
- IRA holders who save for retirement can, however, make qualified contributions until the deadline for reporting yearly taxes in the previous tax year, which is usually on April 15.
- By completing Form 8880, you will be able to calculate and claim the amount that you are eligible for.
Who is Eligible for the Credit?
You can claim it on your retirement savings contribution credit if you meet the following criteria:
- Your age should be 18 or older in the tax year.
- You cannot be a full-time student for a period of five months during the tax year.
- You cannot be claimed as a dependent on another person’s tax return.
- You should have made contributions to a qualified retirement plan during the tax year. This can be an IRA, 401(k), 403(b), or 457 plan.
Saver's Credit for 2023
You may be eligible for a tax credit of 10%, 20%, or 50% of the first $2,000 ($4,000 for joint taxpayers) that you contribute to qualified retirement funds, depending on your AGI. The saver's credit rate, or retirement savings contribution credit, is as follows:
Saver's Credit Rate for 2024:
|
Saver's Credit Rate |
Married filing jointly |
Head of household |
Single filers |
|
50% of eligible contributions |
AGI of no more than $46,000 |
AGI of no more than $34,500 |
AGI of no more than $23,000 |
|
20% of eligible contributions |
$46,001 - $50,000 |
$34,501 - $37,500 |
$23,001 - $25,000 |
|
10% of eligible contributions |
$50,001 - $76,500 |
$37,501 - $57,375 |
$25,001 - $38,250 |
|
0% of eligible contributions |
More than $76,500 |
More than $57,375 |
More than $38,250 |
Saver's Credit Rate for 2023:
|
Saver's Credit Rate |
Married filing jointly |
Head of household |
Single filers |
|
50% of eligible contributions |
AGI of no more than $43,500 |
AGI of no more than $32,625 |
AGI of no more than $21,750 |
|
20% of eligible contributions |
$43,501 - $47,500 |
$32,626 - $35,625 |
$21,751 - $23,750 |
|
10% of eligible contributions |
$47,501 - $73,000 |
$35,626 - $54,750 |
$23,751 - $36,500 |
|
0% of eligible contributions |
More than $73,000 |
More than $54,750 |
More than $36,500 |
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What is a Retirement Savings Contributions Credit - FAQs
1. What is the retirement savings contribution credit?
It is a tax credit for people with lower to middle incomes who contribute to retirement savings plans.
2. What types of retirement plans qualify for the saver's credit?
Eligible plans include IRAs, 401(k)s, 403(b)s, and 457 plans.
3. How to claim the retirement savings contribution credit?
You need to fill out Form 8880 and meet certain conditions, like contributing to a qualifying retirement plan.
4. Is there an age requirement for claiming the saver's credit?
Yes, you must be at least 18 years old.
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