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").
You are eligible for the Saver’s Credit if you meet all three of the following requirements:
You are 18 years of age or older;
You are not claimed as a dependent on another person’s tax return; AND
You are not a student.
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.
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).