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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").

Saver's Tax 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).

 
About the Author

Attorney Jordan D. Howlette is the President of MyTaxRights, LLC and the managing-member of JD Howlette Law, LLC, a civil litigation firm that represents individuals and businesses involved in tax disputes with the IRS, the United States Department of Justice (DOJ), and various state departments of revenue. A former trial attorney with the DOJ’s Tax Division, Jordan leverages his extensive background in tax litigation to educate others about their federal tax rights and responsibilities. Each tax season, Jordan also volunteers as a tax coach with the Center for the Advancement of Tax Equity, where he teaches others how to self-prepare and file their taxes through the non-profit's free tax clinics.


Check out Jordan's MTR profile page for more information, and connect with him on LinkedIn. Be sure to also follow MyTaxRights on Facebook for more tax-saving tips and insight.


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