The saver’s credit can knock as much as $1,000 or $2,000 off your federal income tax bill, depending on whether you file an individual or joint return. Yet many folks don’t know this tax credit exists.
That’s right: Less than half of workers are aware of the saver’s credit, also known as the retirement savings contributions credit, according to a survey by the Transamerica Center for Retirement Studies. And retirees who still save money in retirement accounts may be unaware they could be eligible for the credit.
If you, too, are unfamiliar with the saver’s credit, now’s as good a time as any to get acquainted. The IRS has announced that the income limits for the credit — which are a key factor in determining your eligibility for the tax break — will rise for the 2024 tax year on account of inflation.
Read on for everything you need to know to take advantage of this tax credit on your 2024 tax return — the one that’s due by April 2025.
What types of contributions qualify for the saver’s credit?
The first step toward becoming eligible for the retirement savings contributions credit — as its formal name implies — is saving money in a retirement account.
The IRS says you may be able to take the tax credit for the following types of contributions:
- Contributions to traditional or Roth individual retirement accounts
- Elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP or SIMPLE plan
- Voluntary after-tax employee contributions to a qualified retirement plan (including the Thrift Savings Plan) or 403(b) plan
- Contributions to a 501(c)(18)(D) plan
- Contributions to an ABLE account for which you are the designated beneficiary
Rollover contributions don’t qualify, though.
How much is the saver’s credit worth?
The saver’s credit is worth 10%, 20% or 50% of the amount of money that you contribute to such accounts in a given year, depending on your income. (More on that in a minute.) The maximum possible contribution is $2,000 or, for married couples filing a joint return, $4,000.
That means the maximum amount of the saver’s credit itself is $1,000 or $2,000, depending on your tax-filing status. And that comes right off the top of your tax bill.
Remember, while a tax deduction only lowers your taxable income, a tax credit lowers your tax bill dollar for dollar.
What are the income limits for the saver’s credit?
The saver’s credit is for taxpayers with low to moderate incomes. To be eligible for it, your adjusted gross income (AGI) must be under a certain threshold.
For 2024, you may be eligible for the saver’s credit if your AGI is:
- $76,500 or less, and your tax-filing status is married filing jointly (up from $73,000 in 2023)
- $57,375 or less, and your tax-filing status is head of household (up from $54,750)
- $38,250 or less, and your tax-filing status is single, married filing separately or qualifying widow(er) (up from $36,500)
What are the AGI ranges for the saver’s credit worth?
If you are eligible for the saver’s credit, your AGI also determines how much the credit is worth — that is, the percentage of your retirement account contributions that counts toward the credit. For 2024, those AGI ranges are as follows:
|How much the credit is worth||For married filing jointly||For heads of household||For all other tax-filing statuses|
|50% of your contribution||AGI is up to $46,000 (was $43,500 for 2023)||AGI is up to $34,500 (was $32,625 for 2023)||AGI is up to $23,000 (was $21,750 for 2023)|
|20% of your contribution||AGI is $46,001 – $50,000 (was $43,501 – $47,500)||AGI is $34,501 – $37,500 (was $32,626 – $35,625)||AGI is $23,001 – $25,000 (was $21,751 – $23,750)|
|10% of your contribution||AGI is $50,001 – $76,500 (was $47,501 – $73,000)||AGI is $37,501 – $57,375 (was $35,626 – $54,750)||AGI is $25,001 – $38,250 (was $23,751 – $36,500)|
Let’s say your AGI is $30,000 in 2024, and your tax filing status is single. If you contribute $2,000 to an eligible account for 2024, the saver’s credit would be worth 10% of that contribution. That’s $200 off your tax bill.
Who is eligible for the saver’s credit?
There are a few other stipulations for the saver’s credit.
Notably, you must be 18 or older, not a student and not claimed as a dependent on someone else’s tax return to be eligible for the credit.
Also, if you are withdrawing or recently withdrew savings from a retirement plan, IRA or ABLE account, your eligible contributions may be reduced.
You can learn more on the IRS’ saver’s credit webpage.