Most Workers Don’t Know This Retirement Tax Credit Exists

You might be able to reduce your next income tax bill by thousands of dollars, thanks to an unheralded federal tax break.

Most Workers Don’t Know This Retirement Tax Credit Exists Photo by Cameron Whitman /

Tax season is now well underway. But as in years past, millions of taxpayers are probably still missing out on the chance to slash their tax bill by as much as $4,000 simply because they overlook a little-known federal tax credit.

It’s known as the Saver’s Credit. If you’re eligible for it, the credit is worth as much as 10 to 50 percent of your retirement plan contributions, according to the IRS. The maximum dollar amount of the credit is $2,000 — or $4,000 for married people filing joint tax returns.

And yet, 62 percent of workers are unaware of this credit, according to a recent survey from the Transamerica Center for Retirement Studies.

Your eligibility for the credit depends largely on your income.

To be eligible for the Saver’s Credit for tax year 2018 — or the tax return due in April — you must:

  • Be an adult who is not a full-time student and not claimed as a dependent on someone else’s tax return
  • Have an adjusted gross income of no more than $63,000 for married people filing jointly, $47,250 for people filing as heads of household and $31,500 for all other taxpayers
  • Contribute to one of the types of retirement plans listed below

The percentage of your retirement contributions that are eligible for the Saver’s Credit also depends on your income and tax filing status. Click the IRS link above for a breakdown.

Contributions to various types of retirement plans are eligible for the Saver’s Credit, including:

  • Traditional IRA
  • Roth IRA
  • 401(k)
  • 403(b)
  • 501(c)(18)
  • Governmental 457(b) plan

For more tax breaks you might be overlooking, check out “Tax Hacks 2019: Did You Miss These 7 Credits and Deductions?

Had you heard of the Saver’s Credit before? Let us know below or on Facebook.

Karla Bowsher
Karla Bowsher
I’m a freelance journalist and former newspaper reporter who has covered both personal and public finance. I've worked for a top 50 major metro daily and a community newspaper as well as ... More


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