Finance
Good news for citizens: these are the requirements to qualify for the tax credit of up to $2,000
With next year’s tax season just around the corner there are already chances to preapre for what will surely be the most wonderful time of the year.
The 2025 tax season is just around the corner. The Internal Revenue Service (IRS) is expected to begin receiving and processing refunds for tax year 2024 returns in late January.
Each year, the IRS offers various tax credits or tax breaks to help taxpayers reduce their tax bill or increase the amount of their refund. One of these benefits is the Credit for contributions to retirement savings accounts, also known as the Saver's Credit, of up to $2,000.
“You may be able to get a tax credit for making qualified contributions to your IRA or employer-sponsored retirement plan. In addition, you may be eligible for a credit for contributions to an Achieving an Enhanced Life Experience (ABLE) account if you are the designated beneficiary,” the IRS notes.
Find out if you are eligible for a $2,000 tax credit from the IRS
According to the Internal Revenue Service, you are eligible for the saver's credit if:
- You are 18 years of age or older,
- You are not claimed as a dependent on someone else's return, and
- You are not a student
According to the IRS, the amount of this credit you get depends on your adjusted gross income reported on your Form 1040. The amount of the credit is 50%, 20%, or 10% of the:
- Contributions you make to a traditional or Roth IRA
- Contributions through elective salary deferrals to a section 401(k), 403(b), governmental section 457(b) plan, SARSEP, or SIMPLE plan
- Voluntary employee contributions with after-tax compensation to a qualified retirement plan (including the Thrift Savings Plan) or a section 403(b) plan
- Contributions to a section 501(c)(18)(D) plan
- Contributions to an ABLE account for which you are the designated beneficiary (as of 2018)
It is important to note that rollover contributions do not qualify for the credit. Additionally, your eligible contributions may be reduced by any recent distributions you received from a retirement plan, IRA, or ABLE account.
The maximum contribution amount that could qualify you for the credit is $2,000 ($4,000 for married couples filing jointly), so the maximum amount of the credit you can receive is $1,000 ($2,000 if married filing jointly).
To claim the Savers Credit, use Form 8880, “Credit for Qualified Retirement Savings Contributions” as a supplement to your Form 1040.
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