If you save for retirement in an IRA or a 401(k), you can qualify for Saver’s credit if you meet certain income requirements. Saver’s credit is a $1,000 tax credit ($2,000 for married couples) that can be claimed in addition to the regular tax deduction you get for contributing to an IRA or a 401(k).
Saver’s credit qualifications
To qualify for the Saver’s credit, you must be
- 18 years or older
- Cannot be claimed as a dependent on another person’s return
- Not a student
- Meet the Saver’s credit income requirements
- Save for retirement in a qualified retirement account such as an IRA, 401(k), 403(b), or a 457 plan
- Contribute enough dollars to retirement to get full credit
- Meet the Saver’s credit contribution deadline
Qualifying retirement accounts
Contribution to 401(k), traditional or Roth IRA, 403(b), 457 plans, SARSEP, or SIMPLE plan or the federal government’s Thrift Savings Plan qualify for Saver’s credit.
Retirement contributions of up to $2,000 for individuals and $4,000 for couples qualify for full Saver’s credit. Note that if you take distributions from your retirement account, your Saver’s credit will be reduced.
Income requirements
Here are the income requirements to qualify for Saver’s credit in 2022
- Individuals – up to $34,000
- Married couples – $68,000
- Head of households – $51,000
Saver’s Credit Amounts
| Credit Rate | Married Filing Jointly | Head of Household | All Other Filers* |
|---|---|---|---|
| 50% of your contribution | AGI not more than $41,000 | AGI not more than $30,750 | AGI not more than $20,500 |
| 20% of your contribution | $41,001- $44,000 | $30,751 - $33,000 | $20,501 - $22,000 |
| 10% of your contribution | $44,001 - $68,000 | $33,001 - $51,000 | $22,001 - $34,000 |
| 0% of your contribution | more than $68,000 | more than $51,000 | more than $34,000 |
Depending on your adjusted gross income, you may be eligible for a 50%, 20% or 10% credit of the amount you contribute to a retirement account.
Contribution deadline
Saver’s credit is a credit, not a tax deduction
Dependents and full-time are not eligible
People under the age of 18 or who are claimed as dependent on someone’s tax return do not qualify for Saver’s credit. If you are a full-time student who is enrolled in college for five months or more, you can’t get Saver’s credit.
Who is the Saver’s Credit for
Saver’s credit is targeted at lower to middle income families to give them an incentive to save for retirement. Single filers who make more than $34,000 and married filers who make more than $68,000 do not qualify for the credit.
Examples
Bottom Line
Saver’s credit is a tax credit for contributing to qualifying retirement accounts. There are income requirements you need to meet in order to qualify for the credit. The credit amount is small, but dollar for dollar reduction in your taxes, and is much better than a tax deduction. It’s a great incentive for lower and middle income families to save for retirements. Dependents and full-time students do not qualify for Saver’s credit.