What is the Saver’s Credit, and am I eligible for it?

by | May 9, 2025 | Individual Taxes, Tax Credits

Here’s what HIVE AI had to say about “What is the Saver’s Credit, and am I eligible for it?”:

The Saver’s Credit: What It Is and Your Eligibility

The Saver’s Credit (officially called the Retirement Savings Contributions Credit) is a non-refundable tax credit designed to encourage low to moderate-income taxpayers to save for retirement by providing a tax credit for contributions to qualified retirement plans.

What is the Saver’s Credit?

The Saver’s Credit allows eligible taxpayers to receive a tax credit for contributions made to qualified retirement accounts. This credit directly reduces your tax liability (the amount of tax you owe) rather than just reducing your taxable income like a deduction would.

An individual is allowed a credit for a percentage of qualified retirement savings contributions if the individual meets an adjusted gross income requirement. (Sec. 25B(a) and (b)) Dawson U.S. Tax Court Opinions: Maurice Louis

Credit Amount

The credit amount is a percentage of your retirement contributions, up to $2,000 of contributions ($4,000 if married filing jointly). The percentage varies based on your income level:

For 2020 (most recent data available in the document):

  • 50% of your contribution if your AGI is not more than $39,000 (married filing jointly), $29,250 (head of household), or $19,500 (all other filers)
  • 20% of your contribution if your AGI is $39,001-$42,500 (married filing jointly), $29,251-$31,875 (head of household), or $19,501-$21,250 (all other filers)
  • 10% of your contribution if your AGI is $42,501-$65,000 (married filing jointly), $31,876-$48,750 (head of household), or $21,251-$32,500 (all other filers)
  • 0% of your contribution if your AGI is more than $65,000 (married filing jointly), $48,750 (head of household), or $32,500 (all other filers) IRS – Retirement Savings Contributions Credit (Saver’s Credit)

This means the maximum credit you could receive is $1,000 (50% of $2,000) per person, or $2,000 for a married couple filing jointly.

Eligibility Requirements

To be eligible for the Saver’s Credit, you must meet all of the following criteria:

Your filing status affects your eligibility. For example, if you file as single and your adjusted gross income exceeds $26,000 (for the tax year referenced in the document), you would not be eligible for the credit. Dawson U.S. Tax Court Opinions: Maurice Louis Dawson U.S. Tax Court Opinions: Maurice Louis

Qualifying Retirement Contributions

Contributions to the following retirement plans qualify for the Saver’s Credit:

  • Traditional or Roth IRAs
  • 401(k) plans
  • 403(b) plans
  • 457 plans
  • SIMPLE IRAs
  • SEP IRAs
  • Other qualified retirement plans

Changes Coming in 2027

Beginning in 2027, the Saver’s Credit will be replaced by the Saver’s Match contribution program. Under this new program, by making annual contributions of up to $2,000 to a 401(k)-type plan or an Individual Retirement Account (IRA), an eligible individual can receive as much as an annual $1,000 Saver’s Match contribution from the Treasury.

Unlike the existing Saver’s Credit, which is a nonrefundable tax credit, the Saver’s Match contribution will be paid by Treasury directly to a 401(k)-type plan or non-Roth IRA designated by an individual claiming the Saver’s Match contribution. IRS Newsroom – IR-2024-232

Under section 6433 of the Code, for taxable years beginning after December 31, 2026, an eligible individual is allowed a Saver’s Match contribution equal to an applicable percentage of up to $2,000 of qualified retirement savings contributions to a retirement account. A Saver’s Match contribution is generally allowable as a tax credit that is payable by the Secretary as a contribution of up to $1,000 to an eligible individual’s applicable retirement savings vehicle designated by the eligible individual. Notice 2024-65

For the new Saver’s Match program, an individual who is eligible for a Saver’s Match contribution of greater than zero but less than $100 for the taxable year may elect for the amount claimed to be treated as a refundable income tax credit (rather than contributed to the individual’s applicable retirement savings vehicle). Notice 2024-65

The maximum percentage of qualified retirement savings contributions eligible for Saver’s Match contributions will be 50 percent and will be reduced over a phaseout range based on an individual’s modified adjusted gross income. While the $2,000 maximum amount of qualified retirement savings contributions is not indexed for inflation, the modified adjusted gross income levels in the phaseout range are indexed for inflation.

For example, for most married filers, the phaseout range begins at $41,000 and ends at $71,000, and for most unmarried filers, the phaseout range begins at $20,500 and ends at $35,500. Notice 2024-65

How to Claim the Saver’s Credit

To claim the Saver’s Credit:

  • Make eligible contributions to a qualified retirement plan
  • Complete Form 8880, “Credit for Qualified Retirement Savings Contributions”
  • Attach Form 8880 to your tax return (Form 1040, 1040-SR, or 1040-NR)

You can use the Interactive Tax Assistant tool for the Saver’s Credit on the IRS website to determine your eligibility. IRS Newsroom – IR-2023-222 – Saver’s Credit can help low- and moderate-income taxpayers to save more in 2024

Important Considerations

  • Non-refundable credit: The current Saver’s Credit is non-refundable, meaning it can reduce your tax liability to zero, but you won’t receive a refund for any credit amount that exceeds your tax liability.
  • Income limits change annually: The income limits for the Saver’s Credit are adjusted for inflation each year, so check the current limits when determining your eligibility.
  • Contribution deadlines: Contributions to IRAs for a tax year can be made until the tax filing deadline (usually April 15 of the following year), but contributions to employer plans generally must be made by December 31.
  • No double-dipping: You cannot claim the Saver’s Credit for amounts that were withdrawn from a retirement plan during the testing period (the two years before the due date of your return and the period up to the due date of your return).

Conclusion

The Saver’s Credit is a valuable tax benefit that can help low to moderate-income taxpayers save for retirement while reducing their tax liability. If you meet the eligibility requirements, be sure to claim this credit when you file your tax return. Remember that in 2027, this credit will transform into the Saver’s Match program, which will directly deposit matching contributions into your retirement account rather than providing a tax credit.

Sources:

Try Your AI Tax Assistant for Free!

Ready to transform your practice with agentic AI in tax? See firsthand how our cutting-edge AI tax tools can revolutionize your approach to tax research and planning.

Create Your Free Account