What is the saver's credit and how to qualify for it

Mark Steber

Chief Tax Information Officer

Published on: October 11, 2023

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Saving for retirement isn’t always easy, but there are some incentives to help make it smoother and less of a burden for you. The IRS offers certain credits and benefits, which we’ll explore in this article. Continue reading to find out what the saver’s credit is, how to qualify for it, saver’s credit income limits, and how to calculate your saver’s credit rate.

What is the saver's credit and how to qualify for it

You may be eligible for a tax credit called the saver’s credit if you contribute to a retirement account such as an IRA or an employer-sponsored plan such as a 401(k). You may also be able to take a credit for contributions to your Achieving a Better Life Experience (ABLE) account if you are the designated beneficiary.

What Is the saver's tax credit?

The Ssver’s credit is what is called a “non-refundable tax credit.” This means it may decrease the tax you owe to zero, but it can't provide you with, or add to, a tax refund. So, if you qualify for the full $1,000 credit, but you only owe the IRS $500, you won’t get the extra $500 back as a refund. If you’re getting a refund without the credit, then you can’t claim the credit. It was established to help low- to moderate-income families save for retirement.

Depending on your adjusted gross income (AGI) reported on your Form 1040 series return, the amount of the credit is 50%, 20%, or 10% of:

Contributions you make to a traditional or Roth IRA,
Elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan,
Voluntary after-tax employee contributions made to a qualified retirement plan (including the federal Thrift Savings Plan), or 403(b) plan,
Contributions to a 501(c)(18)(D) plan, or
Contributions made to an ABLE account for which you are the designated beneficiary (beginning in 2018).

Rollover contributions--when you combine one retirement plan with another--do not qualify for the credit. Also, any money you took out of a retirement plan that year may reduce your eligible contributions.

It’s important to note that the maximum contribution amount that may qualify for the credit is $2,000 ($4,000 if married filing jointly), making the maximum credit $1,000 ($2,000 if married filing jointly).

Qualifying for the saver's credit

Beyond what we outlined above, to qualify you must be 18 or older, not a student, and not an eligible dependent for any other taxpayer(s).

For IRS purposes, you're considered a student if you were enrolled full-time at a school or took a full-time, non-farm training course given by a school or a state, county, or local government agency for any part of five calendar months of the tax year.

Saver's credit income limits

There are income limits placed on who can qualify for this credit, meaning you need to make the income limit or less to qualify. You must also make a retirement plan or IRA account contribution and fall under maximum adjusted gross income caps the IRS sets each year.

Work with your team of professionals on other options that may be available to you if you’re not eligible for the saver’s credit.

Saver's credit filing status

As mentioned above, your filing status affects how much of a saver’s credit you may possibly take.

2023 Saver's Credit Rates and Filing Status

Credit Rate	Married Filing Jointly	Head of Household	All Other Filers*
50% of your contribution	AGI not more than $43,500	AGI not more than $32,625	AGI not more than $21,750
20% of your contribution	$43,501- $47,500	$32,626 - $35,625	$21,751 - $23,750
10% of your contribution	$47,501 - $73,000	$35,626 - $54,750	$23,751 - $36,500
0% of your contribution	more than $73,000	more than $54,750	more than $36,500

How to calculate saver's tax credit rate in 2023

As noted above, depending on your AGI and filing status, you may potentially claim the credit for 50%, 20% or 10% of the first $2,000 you contribute during the year to a retirement account. That said, the largest amount of credit that you may claim is $1,000, $400, or $200. The maximum for you depends on your filing status and income.

The biggest credit amounts a married couple filing jointly can claim together is $2,000.
That said, 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 saver’s credit available to you.

Form 8880: Claiming savers credit

Use Form 8880 to claim the saver’s credit. This form is used to compute the credit for qualified retirement savings contributions.

Questions about the saver’s credit? Find a local Jackson Hewitt Tax Pro near you today.

About the Author

Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.

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