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Who's eligible for the IRS Saver's Credit?

Over 60 percent of eligible taxpayers could be leaving $2,000 on the table, missing out on an opportunity to save for the future through the Saver’s Credit.

Over 60 percent of eligible taxpayers could be leaving $2,000 on the table, missing out on an opportunity to save for the future through the Saver’s Credit.

Taxpayers who are 18 or older have the opportunity to put money away for when they retire and at the same time reduce how much they own to Uncle Sam. The Saver’s Credit, also known as the Retirement Savings Contributions Credit can lower your tax burden by up to $2,000 when you contribute to a qualifying retirement account.

The tax credit is targeted at taxpayers with moderate to low incomes but many in this group are unaware of the savings that they are eligible for on their tax bill. Contributing to a retirement account could also be used for a tax deduction lowering your adjusted gross income and potentially further reducing the amount of taxes owed.

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Who can claim the Saver’s Credit?

Taxpayers 18 and older who are not full-time students, can claim a tax credit on 10, 20 or 50 percent of their contributions to a retirement account depending on their adjusted gross income (AGI). The Saver’s Credit is capped at $1,000 for single taxpayers and $2,000 for a married couple filing jointly.

If you were enrolled as a full-time student at any time during 5 months of the calendar tax year at a technical, trade, or mechanical school, you will not be eligible to claim the Saver’s Credit. This includes on-farm training courses through a school or government agency.

The income limits to qualify for the credit are $33,000 for single filers, $49,500 for Head of Household, and $66,000 for married filing jointly. Those taxpayers with incomes that don’t exceed $19,750, $29,625 and $39,500, respectively, can claim 50 percent of there contribution to their retirement account, capped at a total credit of $1,000 for single filers and $2,000 for married filing jointly.

So for example, if you are a single filer with an AGI of $19,000 in 2021 and you put away $2,000 in a traditional IRA or 401(k) you’ll be eligible to claim $1,000 off your taxes. According to a Transamerica Center retirement survey, in 2019 only 35 percent of workers who earn less than $50,000 were aware of the Saver’s Credit.

Taxpayers generally have until Tax Day when they file their fiscal declaration to contribute to their traditional IRA and still claim a deduction on their tax return.

The amount of the credit you claim will reduce what you owe in taxes to Uncle Sam dollar for dollar. Additionally, if the retirement account you put your money into comes with a tax deduction, such as a 401(k) or traditional IRA, you will lower your AGI, potentially helping you to claim a greater percentage of your contribution.

What retirement accounts qualify for the Saver’s Credit?

The IRS states that the following retirement accounts can qualify for the 10, 20 or 50 percent credit amount of contributions made, up to the $1,000 cap for single taxpayers and $2,000 for married couples filing jointly.

  • Traditional or Roth IRA
  • 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan
  • Thrift Savings Plan
  • 501(c)(18)(D) plan
  • Achieving a Better Life Experience (ABLE) account

Only new money contributions will qualify for the Saver’s Credit. Money that rolls over from one retirement account to another will not count. Furthermore, recent payouts from a retirement plan may reduce eligible contributions.


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