What Is the Saver's Tax Credit?

If you contribute to a retirement plan such as a 401K, you may be eligible to receive the Saver’s Tax credit. The Saver’s Tax credit is a tax credit that is provided to households, and individuals, with low income who contribute to eligible retirement plans. The maximum amount of contribution that can be used towards the credit is $2,000. This tax credit is non-refundable. The eligible retirement plans are 401(k) and 457 Plans, traditional IRA, Roth IRA, SEP and SIMPLE plans.

Qualifying

As with all tax credits, there are certain eligibility requirements that must be met in order to qualify to claim the Saver’s Tax credit. You must be at least 18 years old. If you are a full-time student, or claimed as a dependent, you are not eligible to take this credit.

Income Guidelines

Below are the qualifying income and credit rate in which the credit is given:

  • Adjusted income of $30,000 or less if married, or $22,500 if single: tax credit is 50%
  • Adjusted income of $30,001-$32,500, married or $22,501-$24,375, single: tax credit is 20%
  • Adjusted income of $32,501-$50,000, if married or $24,376-$37,500, if single: tax credit is 10%
  • Amounts over the maximum are not eligible for credit

An example of the calculation is if you earned $23,000 and contributed $1500 to your retirement plan, you would receive $300 ($1500 * 20%).

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