Tax season is now 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 called the Retirement Savings Contributions Credit, aka the Saver’s Credit.
If you’re eligible for it, this credit is worth as much as 10% to 50% of your retirement account 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, only 38% of workers are aware of this credit, according to a recent survey from the nonprofit 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 2019 — which is 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 (found on your tax return) of no more than $65,000 if your tax-filing status is married filing jointly, $48,750 if your status is head of household and $31,500 for all other taxpayers.
- Contribute to an eligible retirement plan (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 the following types of retirement plans are eligible for the Saver’s Credit:
- Traditional IRA
- Roth IRA
- SIMPLE IRA
- Governmental 457(b) plan
- 403(b) — voluntary after-tax employee contributions
For more tax breaks you might be overlooking, check out “Did You Miss These 7 Credits and Deductions?”
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