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The saver’s credit can be claimed by filing Form 8880 — Credit for Qualified Retirement Savings Contributions.
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The saver’s credit is a tax credit you can qualify for after contributing to a retirement account.
The credit lowers your tax bill by 50%, 20%, or 10% of your contribution, depending on your income.
Only the first $2,000 of contributions ($4,000 for married filing jointly) count toward the credit.
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The retirement savings contributions credit, also known as the saver’s credit, is a tax credit you can receive for contributing to a retirement fund. The credit is calculated into your tax return, which is more advantageous than a tax deduction because it gives you a dollar-for-dollar discount on your tax bill. If you get a $500 saver’s credit, you’ll pay $500 less on your tax bill.
The purpose of the saver’s credit is to put money back in your pocket after saving for retirement. “It’s kind of like an incentive for people to put money away for retirement with the additional benefit of getting a credit,” says Cassandra Kirby, an enrolled agent and Partner and Private Wealth Advisor at Braun-Bostich & Associates in Pittsburgh.
Who can claim the saver’s credit?
You can claim the saver’s credit no matter your filing status: Married filing jointly, head of household, single, married filing separately, or qualifying widow(er) all can receive the credit. However, your filing status determines the income maximum you fall under.
There are three requirements to be eligible to claim the saver’s credit:
First, you must be over 18 years old and you can’t be a dependent on someone else’s tax returns or a student.
Next, you need to earn under the income threshold for your filing status. For 2022, the maximum income is $68,000 for joint filers and $51,000 for heads of household. If you’re filing under any other category, your AGI maxes out at $34,000. For 2023, the maximums are $73,000, $54,750, and $36,750.
Because the qualifying incomes are low, it can be difficult to have the right amount of income and owe money in taxes. “It would appeal to younger people who are working who don’t have a large income and then also retired or older people who have a lower income but are still looking for savings and tax-efficient ways to do it,” says Kirby.
Finally, you need to have contributed to an eligible account. Most contributions to one of the following retirement accounts qualify:
Traditional or Roth IRA401(k), 403(b), or governmental 457(b)SARSEP or SIMPLE planThrift Savings Plan501(c)(18)(D) planAn ABLE account that designates you as the beneficiary
“It’s something for older people or retired people to consider if they have part-time earnings or their spouse has part-time earnings,” says Kirby.
Note: Rollover contributions don’t count toward the saver’s credit. So, even if you roll over a 401(k) from your former employer to your new company’s retirement plan, these funds won’t get you this tax credit. Also, you need to owe taxes to be able to use the credit as it can only reduce your tax liability down to zero.
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How much is the saver’s credit?
Anyone who qualifies for the saver’s credit will receive a percentage of their retirement contribution back as a tax credit. The saver’s credit is worth 50%, 20%, or 10% of your contribution, depending on your income level. However, you can receive the credit only on the first $2,000 per individual and $4,000 per married couple (filing jointly) that you contribute to retirement.
In other words, the maximum credit someone can receive is 50% of $2,000 (or $1,000) — but the credit can be bumped up to $2,000 if you’re married and filing jointly. Thus, you can reduce your tax bill by up to $1,000 per individual by taking advantage of the saver’s credit.
The table below explains the percentage you’ll receive back based on your income for the current 2022 tax year:
Credit rate
Married filing jointly
Head of household
All other filers*
50% of your 2022 contribution
AGI under $41,000
AGI under $30,750
AGI under $20,500
20% of your 2022 contribution
$41,001-$44,000
$30,751-$33,000
$20,501-$22,000
10% of your 2022 contribution
$44,001-$68,000
$33,001-$51,000
$22,001-$34,000
0% of your 2022 contribution
Over $68,000
Over $51,000
Over $34,000
Source: IRS. *Single, married filing separately, or qualifying widow(er)
And here are the rates for 2023:
Credit rate
Married filing jointly
Head of household
All other filers*
50% of your 2023 contribution
AGI under $43,500
AGI under $32,625
AGI under $21,750
20% of your 2023 contribution
$43,501-$47,500
$32,626-$35,625
$21,751-$23,750
10% of your 2023 contribution
$47,501-$73,000
$35,626-$54,750
$23,751-$36,500
0% of your 2023 contribution
Over $73,000
Over $54,750
Over $36,750
Source: IRS. *Single, married filing separately, or qualifying widow(er)
How to calculate the saver’s credit
Doing the math to find your total saver’s credit is simpler than it may seem. For example, let’s say you make $30,000 as head of household and contribute $4,000 to your traditional IRA in 2022. You would qualify for a 50% credit on the first $2,000 you contributed. Therefore, you would get a $1,000 saver’s credit. Also, say you end up owing $900 in taxes — you’re off the hook for paying anything that year.
Quick tip: Contributions made to a retirement account that gives a tax deduction, like a traditional IRA or 401(k), lower your taxable income by the amount you contribute. This type of deduction can further reduce your taxes owed.
The bottom line
The saver’s credit is one method of reducing a tax bill for anyone who can claim it. This savings can offset some of the cost of contributing to a retirement account and decrease the burden of saving for retirement.
When you’re filing taxes, be sure to check your income, filing status, and contribution level using the information in this article to see if you qualify for the saver’s credit.