The Savers Tax Credit – Are you taking advantage of it?
The Savers Credit gives a special tax break to low and moderate income taxpayers who are saving for retirement.
Few people take advantage of this tax break because they don’t know about it. If you qualify, it can reduce your tax bill.
To be eligible to claim the Savers Credit, you must be:
- 18 years or older
- Not a full-time student
- Not a dependent on someone else’s taxes
The amount of the credit you can receive depends on your adjusted gross income (AGI). The credit can be 50%, 20%, or 10% of your retirement plan or IRA, up to $2,000 if filing single or $4,000 if married and filing jointly.
For 2020, the adjusted gross income (AGI) eligibility requirements for the Savers Credit are:
|Percent of your retirement savings contribution that qualifies for the Savers Credit
||Married filing jointly AGI
||Head of Household AGI
||Single filing AGI
|$39,001 – $42,500
||$29,250 – $31,875
||$19,501 – $21,250
|$42,501 – $65,000
||$31,876 – $48,750
||$21,251 – $32,500
How does the tax credit work?
The Saver’s Credit is a credit for
your contributions made to your Traditional IRA (or other qualified retirement plan or Roth IRA). Rollovers are not eligible for the Saver’s Credit. Lastly, distributions from your retirement plan should also be deducted from the total contributions when calculating your credit. For more information, please visit https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit.
Claiming the credit
To claim the credit, use Form 8880