Retirement Savings Contribution Credit
The Savers Credit Can Lower Your Taxes While You Save for Retirement
Individuals who save for retirement may qualify for a federal tax credit. The Retirement Savings Contribution Credit, or the Saver's Credit for short, is a federal tax credit designed to encourage low- and modest-income individuals to save for retirement.
The credit is a percentage of savings, from 10% to 50%. The credit also depends on your overall income and filing status.
Qualifying for the Retirement Savings Tax Credit
You qualify for the Saver's Credit if
- You meet the income criteria,
- You contributed money to a retirement plan,
- You are not a full-time student,
- You are age 18 or older,
- You are not claimed as a dependent.
The Saver's Credit is limited by a person's adjusted gross income. The income limits for the year 2015 for the saver's credit depends on your filing status:
- $30,500 or less for single, married filing separately, and qualifying widow(er).
- $45,750 for head of household.
- $61,000 for married filing jointly.
Dollar Amount of the Saver's Credit
The tax credit is calculated based on a percentage of your retirement contributions. The maximum credit is $2,000 for unmarried filers and $4,000 for married filers. The percentage is determined by your adjusted gross income and your filing status.
The percentage of contributions you get as a tax credit is 10%, 20%, or 50%, depending on your adjusted gross income. A chart with the tax credit percentages is found on page 2 of Form 8880.
Consider a Roth IRA if You Qualify
If you qualify for the Retirement Savings Tax Credit, consider contributing to a Roth IRA. With a Roth, your contributions enjoy tax-free growth and you won't have to include the Roth distributions in your taxable income when you retire. A Roth plus the saver's credit is a very tax-efficient combination.
Claiming the Saver's Credit
To claim the credit, you will need to fill out Form 8880 (PDF) and attach it to your Form 1040A or 1040.