Do you qualify for the saver’s credit?
The Saver’s Credit may provide a tax credit for saving for retirement if you meet the requirements and contribute to a qualifying plan or account.
Qualifications for the Saver’s Credit
The Saver’s Credit allows you to save on your federal income tax if you have an annual adjusted gross income of no more than:
- $32,500 filing individually
- $48,750 filing as head of household
- $65,000 filing jointly
The credit applies if you are at least 18 years of age and invested in a 401(k), 403(b), or 457(b) governmental plan; Simplified Employee Pension (SEP) plan; Individual Retirement Account (IRA); or SIMPLE IRA. Full-time students or individuals who are claimed as dependents on another taxpayer’s return aren’t eligible.
What’s your potential tax credit rate?
As this chart shows, the credit rate is based on your adjusted gross income (AGI) in the taxable year for which you claim the credit. If you’re an individual or head of household, you can claim the credit on up to $2,000 of your annual contributions. If you’re married and filing jointly, you can claim it on up to $4,000. The following chart is for the 2020 tax year.
|Rate||Individual||Head of household||Joint|
|50%||$0 – $19,500||$0 – $29,250||$0 – $39,000|
|20%||$19,501 – $21,250||$29,251 – $31,875||$39,001 – $42,500|
|10%||$21,251 – $32,500||$31,876 – $48,750||$42,501 – $65,000|
How does the Saver’s Credit work?
Let’s say your adjusted gross income is $25,000 and you file individually. If you contributed $2,000 to your employer-sponsored retirement plan, you’d qualify for an income tax credit of $200 (10% of $2,000). Learn more about calculating your credit at IRS.gov.
Please note: These are just some of the provisions of the Saver’s Credit. You may want to consult with a financial professional before you claim the credit.
Save for your future
What can you do with the money you save? Increase contributions to your retirement plan! Every extra dollar you save now may help you get closer to achieving your savings goals.