What is Savers Credit and How Does It Work?

The Savers Credit is a government-sponsored program that encourages low- and moderate-income workers to save for their retirement. The credit is worth up to $1,000 for an individual or $2,000 for a couple filing jointly.

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What is Savers Credit?

The Savers Credit is a tax break for low- and moderate-income taxpayers who save for retirement.

What is the Savers Credit Income Limit?

To qualify for the Credit, your adjusted gross income must be below certain limits that vary depending on your filing status. The credit is not available to married taxpayers filing separately or to estate or trust taxpayers.

The following are the income limits for the Savers Credit for 2020:
-$32,500 for single taxpayers
-$48,750 for heads of household
-$65,000 for married taxpayers filing jointly

How Much Can You Contribute to Your Retirement Account and Still Get the Savers Credit?

The Savers Credit, also known as the Retirement Savings Contributions Credit, is a tax credit for low- and moderate-income taxpayers who make contributions to their retirement savings accounts.

To be eligible for the credit, you must be age 18 or older and cannot be a full-time student or claimed as a dependent on someone else’s tax return.

The credit is worth up to $1,000 for taxpayers who contribute to a qualified retirement savings plan, such as a 401(k) or an Individual Retirement Account (IRA). The credit is based on your contribution amount and your adjusted gross income (AGI).

If your AGI is below $28,750 for single filers or $57,500 for joint filers, you may be eligible for the full credit. The credit amount begins to phase out at higher incomes and is not available to taxpayers with AGIs above $40,250 for single filers or $80,500 for joint filers.

For example, if you are a single taxpayer with an AGI of $30,000 and you contribute $1,000 to your 401(k), you would receive a credit of $500 (($30,000 – $28,750) x 50% x $1,000).

How Does the Savers Credit Work?

Savers Credit is a tax credit for eligible taxpayers who save for their retirement. The credit is worth up to $1,000 for single filers and $2,000 for joint filers. To be eligible, you must be at least 18 years old, not a full-time student, and not claimed as a dependent on someone else’s tax return. You must also have earned income from a job or self-employment.

How is the Savers Credit Calculated?

The savers credit is a tax credit for low- and moderate-income taxpayers who make contributions to qualified retirement plans. The credit is designed to encourage saving for retirement.

To be eligible for the savers credit, you must be 18 years of age or older, not a full-time student, and not claimed as a dependent on another person’s tax return. In addition, your adjusted gross income (AGI) must be below certain limits.

For tax year 2020, the AGI limits are $32,500 for single taxpayers, $48,750 for head of household taxpayers, and $65,000 for married taxpayers filing joint returns. The AGI limits are increased each year for inflation.

The savers credit is calculated as a percentage of your retirement plan contributions up to a maximum amount. For tax year 2020, the maximum amount is $2,000 for single taxpayers, $4,000 for head of household taxpayers, and $4,000 for married taxpayers filing joint returns.

The percentage used to calculate the savers credit ranges from 10% to 50%, depending on your AGI. The higher your AGI is within the eligible range, the lower percentage is used. For example, if your AGI is at the upper end of the eligible range ($32,500 for single taxpayers), only 10% of your retirement plan contributions would be eligible for the credit. But if your AGI were at the lower end of the eligible range ($20,000 for single taxpayers), 50% of your contributions would be eligible for the credit.

What is the Savers Credit Rate?

The savers credit is a tax credit for low- and moderate-income individuals and couples who save for retirement. The credit is worth up to $1,000 for individuals and $2,000 for couples.

To qualify for the savers credit, you must be 18 years or older and not a full-time student. You also must have earned income from working. If you are married, you must file a joint tax return to receive the credit.

The savers credit is based on the amount you contribute to a retirement savings plan, such as a 401(k) or an individual retirement account (IRA). The maximum contribution amount that can be used to calculate the credit is $2,000 for individual taxpayers and $4,000 for taxpayers who are married and filing a joint return.

The savers credit rate is 50%, meaning that your credit will be worth 50% of your eligible retirement contributions up to the maximum contribution amount. For example, if you contribute $1,000 to your 401(k), your savers credit will be worth $500.

How to Claim the Savers Credit

The Savers Credit is one of the lesser-known tax credits available to taxpayers. The credit is worth up to $1,000 for an individual ($2,000 for a married couple filing joint tax return) and is available to those who contribute to a retirement plan, such as a 401(k) or an IRA. To claim the credit, you’ll need to file Form 8880 with your tax return.

When Can You Claim the Savers Credit?

Depending on your filing status and income, you may be able to take the Savers Credit for contributions to a 401(k), 403(b), most 457 plans, and thrift savings plans. You can also claim the credit for contributions to a traditional or Roth IRA.

The credit is based on your contribution amount, filing status, and adjusted gross income:

If your contribution amount is…
$2,000 or less
$4,000 or less for those filing a joint return
…and your AGI is…
Below $27,750 for single filers
Below $55,500 for those filing a joint return
Between $27,750 and $32,500 for single filers
Between $55,500 and $65,000 for those filing a joint return

…you can claim a credit of 10–50% of your contribution amount.

Savers who are 50 years old or older at the end of the year can contribute an additional $1,000 per year.

How to Claim the Savers Credit

Savers Credit is a government-sponsored program designed to encourage lower and middle-income families to save for retirement. The credit is available to taxpayers who contribute to a retirement account, such as a 401(k) or IRA. The credit is worth up to $1,000 for individuals and $2,000 for couples filing jointly.

To claim the credit, you must be at least 18 years old and cannot be a full-time student or claiming another dependent on your taxes. You also must not have a retirement plan through your employer.

If you meet these requirements, you can claim the credit by filling out Form 8880. This form is available on the IRS website.