Retirement Savings Contribution Credit

The Savers Credit Can Lower Your Taxes While You Save for Retirement

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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.

Income Limits

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.

You can contribute to just about any kind of retirement plan, such as a 401(k) plan, traditional IRA, Roth IRA, SEP-IRA, SIMPLE IRA, the federal Thrift Savings Plan, or 403(b) plans.

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.