What Is the Savers Credit? (2024)

Saving for retirement

The Retirement Savings Contributions Credit, also known as the Savers Credit, gives a special tax break to low- and moderate-income taxpayers who are saving for retirement. This credit is in addition to the other tax benefits for saving in a retirement account. If you qualify, a Savers Credit can reduce or even eliminate your tax bill.

Unfortunately, many eligible taxpayers don't take advantage of this break because they don't know about it. Indeed, a recent survey* shows that only 12% of American workers with annual household incomes of less than $50,000 are aware of the Savers Credit.

How much could the Savers Credit cut from my tax bill?

Depending on your adjusted gross income and tax filing status, you can claim the credit for 50%, 20% or 10% of the first $2,000 you contribute during the year to a retirement account. Therefore, the maximum credit amounts that can be claimed are $1,000, $400 or $200.

• The biggest credit amount a married couple filing jointly can claim together is $2,000.
• But, if you and/or your spouse took a taxable distribution from your retirement account during the two years prior to the due date for filing your return (including extensions), that distribution reduces the size of the Savers Credit available to you.
• The Savers Credit is a 'non-refundable' tax credit. That means this credit can reduce the tax you owe to zero, but it can't provide you with a tax refund.

Which retirement accounts qualify for the credit?

The Savers Credit can be claimed for your contributions to a:

• 401k
• 403(b)
• 457 plan
• Simple IRA
• SEP IRA

You can’t claim your employer'scontributions tothese accounts, however. Your contributions to a traditional IRA or a Roth IRA are also eligible for the Savers Credit.

Am I eligible?

To claim a Savers Credit, you have to be:

• Be age 18 or older
• Not be a full-time student
• Not be claimed as a dependent on someone else's tax return
• Have made your retirement contribution during the tax year for which you are filing your return
• Meet the income requirements

In 2023, the maximum adjusted gross income for Savers Credit eligibility is:

• $73,000 for a married couple filing jointly
• $54,750 for file as Head of Household
• $36,500 for all other taxpayers

The maximum credit you can claim phases out as your income increases.

2023 Adjusted Gross Income:

Examples:

John and Maria are married and file jointly. He’ll contribute $1,000 to his 401(k) plan this year. She’ll contribute $1,000 to an IRA. Their 2023 combined adjusted gross income is $33,500. Each of them is therefore eligible to claim a 50% credit for their contributions. Together, their credits are worth $1,000 (50% of $1,000 x 2 = $1,000).

Christine files as a head of household. She’ll contribute $1,200 to her 403(b) plan this year. With a 2023 adjusted gross income is $35,000, Christine can claim a 20% Savers Credit for her contribution, worth $240.

Each year these amounts are adjusted for inflation.

For 2024 the maximum adjusted gross income limits increase to:

• $76,500 for a married couple filing jointly
• $57,375 for file as Head of Household
• $38,250 for all other taxpayers

2024 Adjusted Gross Income limits:

How do I claim the Savers Credit?

To claim the credit, use Form 8880, "Credit for Qualified Retirement Savings Contributions" as an addition to your Form 1040.

*Transamerica Center for Retirement Studies, 11th Annual Survey, conducted online within the United States by Harris Interactive on behalf of Transamerica Center for Retirement Studies between December 3, 2009, and January 18, 2010, among 3,598 full-time and part-time workers.