The Internal Revenue Service (IRS) encourages low- and moderate-income taxpayers to take advantage of the Saver’s Credit—a valuable tax incentive that rewards contributions to retirement accounts. By saving for your future today, you could reduce your tax bill or increase your refund in 2025 and beyond.
What Is the Saver’s Credit?
Also known as the Retirement Savings Contributions Credit, the Saver’s Credit offsets a portion of the first $2,000 ($4,000 if married filing jointly) that eligible taxpayers voluntarily contribute to retirement accounts such as:
- Individual Retirement Arrangements (IRAs)
- 401(k) plans
- 403(b) plans for public school employees and nonprofit workers
- Governmental 457 plans for state or local government employees
- Thrift Savings Plans (TSPs) for federal employees
The credit also applies to individuals with disabilities who contribute to an Achieving a Better Life Experience (ABLE) account as a designated beneficiary. For more details on ABLE accounts, consult Publication 907, Tax Highlights for Persons with Disabilities, on IRS.gov.
The maximum Saver’s Credit is $1,000 ($2,000 for married couples). The credit can increase a taxpayer’s refund or reduce the tax owed but is affected by other deductions and credits. Rollover contributions do not qualify for the credit, and distributions from a retirement plan or ABLE account reduce the contribution amount used to figure the credit.
Saver’s Credit Benefits
The Retirement Savings Contributions Credit, also known as the Saver’s Credit, helps taxpayers offset a portion of the first $2,000 ($4,000 if married filing jointly) they voluntarily contribute to Individual Retirement Arrangements (IRAs), 401(k) plans and similar workplace retirement programs.
It’s important to note that:
- Rollover contributions don’t qualify for the credit.
- Distributions from retirement or ABLE accounts reduce the contribution amount used to calculate the credit.
Who Is Eligible for the Saver’s Credit?
Taxpayers may qualify for the Saver’s Credit if they meet all the following requirements:
- Age 18 or older.
- Not claimed as a dependent on someone else’s tax return.
- Not a full-time student.
Income Limits for Eligibility
For the 2024 tax year, the adjusted gross income (AGI) thresholds for the Saver’s Credit are:
- Married couples filing jointly: Up to $76,500.
- Heads of household: Up to $57,375.
- Single filers or married individuals filing separately: Up to $38,250.
- Qualified surviving spouses: Eligible under their AGI threshold.
Deadlines to Claim the Credit
To maximize your benefits, make your contributions by the relevant deadlines:
- IRA Contributions: You have until April 15, 2025, the due date for filing your 2024 federal tax return, to set up or contribute to an IRA (both Roth and traditional IRAs qualify).
- Workplace Retirement Plans: Contributions must be made by December 31, 2024, for plans such as:
- 401(k)
- 403(b)
- Governmental 457 plans
- Thrift Savings Plans (TSP)
How to Claim the Saver’s Credit
To determine if you qualify, use the Interactive Tax Assistant Tool on the IRS website. If eligible, you’ll need to file Form 8880: Credit for Qualified Retirement Savings Contributions with your tax return. The instructions for Form 8880 provide details on qualifying plans, contribution limits, and how to calculate your credit.
Why the Saver’s Credit Matters
The Saver’s Credit is more than just a tax break—it’s a motivator to invest in your future. For many households, retirement savings can be challenging, but this credit provides an incentive to build a secure financial foundation.
Tips for Maximizing Your Retirement Savings
- Start Early: Contribute as soon as possible to allow your savings to grow over time.
- Take Advantage of Employer Matches: If your employer offers a retirement plan match, contribute enough to get the full benefit—it’s essentially free money.
- Review Contribution Limits Annually: Stay updated on IRS limits for retirement accounts to maximize your contributions.
- Check Your Tax Liability: Ensure you’re making the most of deductions and credits available to you.