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Do you know about the Saver's Tax Credit?

If you make contributions to your individual retirement account (IRA) or employer-sponsored retirement plan, you may be eligible to receive a tax credit (also known as the "Saver’s Credit").

Eligibility

You are eligible for the Saver’s Credit if you meet all three of the following requirements:

  1. You are 18 years of age or older;

  2. You are not claimed as a dependent on another person’s tax return; AND

  3. You are not a student.

  4. You are considered a student for eligibility purposes if: (a) you were enrolled as a full-time student at a school for 5 calendar months of the tax year; or (b) you too a full-time, on-farm training course given by a school or a state, county, or local government agency for 5 calendar months of the tax year.


Qualified Contributions

The amount of the credit depends on your adjusted gross income (AGI), and will either be 50%, 20%, or 10% of your qualified contributions. Qualified contributions include:

  • Contributions you make to a traditional or Roth IRA;

  • Elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan;

  • Voluntary after-tax employee contributions made to a qualified retirement plan (including the federal Thrift Savings Plan) or 403(b) plan;

  • Contributions to a 501(c)(18)(D) plan; or

  • Contributions made to an ABLE account for which you are the designated beneficiary (beginning in 2018).


2020 Saver's Tax Credit Limits


Married Filing Jointly

  • 50% of qualified contributions if AGI is equal to or less than $39,000

  • 20% of qualified contributions if AGI is between $39,001 and $42,500

  • 10% if qualified contributions if AGI is between $42,501 and $65,000

  • No credit if AGI is greater than $65,000

Head of Household

  • 50% of qualified contributions if AGI is equal to or less than $29,250

  • 20% of qualified contributions if AGI is between $29,251 and $31,875

  • 10% if qualified contributions if AGI is between $31,876 and $48,750

  • No credit if AGI is greater than $48,750

All Other Filers

  • 50% of qualified contributions if AGI is equal to or less than $19,500

  • 20% of qualified contributions if AGI is between $19.501 and $21,250

  • 10% if qualified contributions if AGI is between $21,251 and $32,500

  • No credit if AGI is greater than $32,500


Example: Jill, who works at a retail store, is married and earned $41,000 in 2020. Jill’s spouse was unemployed in 2020 and did not have any earnings. Jill contributed $2,000 to her IRA for 2020. After deducting her IRA contribution, the adjusted gross income shown on her joint return is $39,000. Jill may claim a $1,000 tax credit (50% of her $2,000 IRA contribution) on her 2020 tax return.


For more information, see IRS Form 880 (Credit for Qualified Retirement Savings Contributions).


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