The Retirement Savings Contributions Credit

The Saver's Credit can lower your taxes while you save for retirement

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The Retirement Savings Contributions Credit is a federal income tax credit designed to encourage low- and modest-income individuals to save for retirement. Sometimes referred to as the "Saver's Credit," the credit equals 10% to 50% of your contributions for the year, up to certain limits.

How much of your contributions you can claim as a credit depends on your adjusted gross income (AGI) and your federal income tax filing status. Learn more about qualifying for and claiming the Saver's Credit on your federal income taxes.

Key Takeaways

  • The Retirement Savings Contributions Credit equals a portion of your contributions to a qualifying retirement or ABLE savings account.
  • To qualify for the credit, you must meet income limits, be over age 18, not be anyone's dependent, and not be a student.
  • The credit is worth 0% to 50% of your contributions, depending on your adjusted gross income and filing status.

Qualifying for the Saver's Credit

You can include contributions to just about any type of retirement plan when claiming the credit, including contributions to a:

  • 401(k) plan
  • Traditional or Roth IRA
  • 403(b) or 457(b) plan
  • SARSEP or SIMPLE plan
  • Thrift Savings Plan
  • 501(c)(18)(D) plan
  • ABLE account for which you are the designated beneficiary

However, rollover contributions, which are funds that you move from one retirement plan to another, don't qualify.

Even if you made contributions to a retirement account, you need to meet other criteria to qualify for the credit. In addition to having contributed money to a qualifying plan, you must:

  • Meet income limits
  • Be aged 18 or older
  • Not be claimed as any other taxpayer's dependent
  • Not be a student

A student is anyone who was enrolled as a full-time student at a school or who took a full-time, on-farm training course given by a school or government agency for at least five calendar months of the tax year.

Income Limits for the Saver's Credit

The Saver's Credit is limited by your AGI, which is based on your filing status. Your AGI is your gross income minus adjustments to income, such as educator expenses, student loan interest, and alimony payments.

Depending on your income, you can claim between 0% and 50% of your contributions as a tax credit. For the 2021 tax year (the return you will file in 2022), you become ineligible for the credit (0%) if your AGI is more than:

  • $33,000 if your filing status is single, married filing separately, or qualifying widow(er)
  • $49,500 if your filing status is head-of-household
  • $66,000 if your filing status is married filing jointly

For the 2022 tax year (the return you will file in 2023), you become ineligible for the credit if your AGI is more than:

  • $34,000 if your filing status is single, married filing separately, or qualifying widow(er)
  • $51,000 if your filing status is head-of-household
  • $68,000 if your filing status is married filing jointly

Calculating Your Retirement Savings Contributions Credit

The amount of your tax credit is a percentage of your retirement contributions.

The maximum contribution limit that the credit can be applied toward is $2,000 (maximum $1,000 credit) for taxpayers who file as single, head-of-household, qualifying widow(er), or married filing separately. It's $4,000 (maximum $2,000 credit) for married taxpayers who file a joint return.

Retirement Savings Contributions Credit for Tax Year 2021
Credit as a % of Contributions AGI for Single, Married Filing Separately, or Qualifying Widow(er) AGI for Head of Household AGI for Married Filing Jointly
50%  $19,750 or less $29,625 or less $39,500 or less
20%  $19,751 - $21,500 $29,626 - $32,250 $39,501 - $43,000 
10%   $21,501 - $33,000 $32,251 - $49,500 $43,001 - $66,000
0%   more than $33,000  more then $49,500  more than $66,000

As an example, suppose you qualify as head-of-household, and you contribute $500 per month, or $6,000 per year, to a qualifying retirement plan. Your AGI was $45,000 in 2021. That means you're eligible for a credit of 10% of the $2,000 contribution limit. That works out to a credit of $200.

You could claim a credit of $400, or 20% of the contribution limit, if your income were $30,000. You would be entitled to a credit of 50% of the $2,000 limit—or $1,000—if your AGI were $29,000.

These income limits are adjusted for inflation, so they increase for tax year 2022 (the return you will file in 2023).

Retirement Savings Contributions Credit for Tax Year 2022
Credit as a % of Contributions AGI for Single, Married Filing Separately, or Qualifying Widow(er) AGI for Head of Household AGI for Married Filing Jointly
50% $20,500 or less $30,750 or less $41,000 or less
20% $20,501 - $22,000 $30,751 - $33,000 $41,001- $44,000 
10%  $22,001 - $34,000 $33,001 - $51,000 $44,001 - $68,000
0%  more than $34,000 more than $51,000 more than $68,000

Provisions for ABLE Accounts

Achieving a Better Life Experience (ABLE) accounts are tax-advantaged savings accounts that can be established on behalf of disabled individuals and their families. They were first introduced in 2014. Beneficiaries must have become disabled prior to age 26. These accounts became qualified for the Saver's Credit beginning in 2018.

You must be the designated beneficiary of the account to claim the Saver's Credit. The same income limits and other requirements apply based on filing status. Rollovers from other accounts don't qualify as contributions in this type of account either.

As the account owner, a beneficiary may contribute to these accounts, as may family and friends, but only the beneficiary's own contributions are eligible for the Saver's Credit.

How to Claim the Saver's Credit

To claim the Saver's Credit on your federal income tax return, first complete IRS Form 8880. Transfer the amount that appears on line 12 to Schedule 3, line 4. Then transfer the total of all nonrefundable credits you qualify for on line 7 of Schedule 3 to line 20 of your Form 1040. Attach Form 8880 and Schedule 3 to your tax return.

If you use tax preparation software, it will prompt you to answer questions about your retirement savings and can complete these forms automatically for you. They will then be printed or e-filed with your full return, depending on the option you select.

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