Retirement Savings Contributions Credit (The Saver’s Credit)

Last Updated on April 30, 2024 by VantagePoint

What is the Retirement Savings Contributions Credit or the Saver’s Credit?

The Retirement Savings Contributions Credit also known as the Saver’s Credit offers a benefit for low-to-moderate-income taxpayers making eligible retirement contributions, functioning as a nonrefundable credit to lower owed taxes potentially to zero.

The Saver’s Credit offers a financial incentive for individuals contributing up to $2,000 to IRAs, 401(k)s, and similar retirement plans, as well as for those with disabilities contributing to ABLE accounts. The Saver’s Credit is designed to reduce the cost of saving for retirement. The credit is also available for qualified individuals with disabilities who are principal beneficiaries of an Achieving a Better Life Experience (ABLE) account and contribute to it.

Employers are advised to inform and educate their employees about the retirement savings contribution credit as it can help employees increase their take-home pay but also increase the deductions for the employer.

If you need assistance in understanding how the Saver’s Credit works or how to apply for it, please get in touch with our team!

Key takeaways

Eligibility for the saver’s credit is possible if the employee’s income is in the lower to middle range and they have made contributions to a 401(k) or IRA over the last year.
This credit can decrease the total amount owed in taxes, with the reduction amount varying based on income and the amount the employee has saved.
To qualify for the saver’s credit, certain criteria must be met, and dependents or students are not eligible.
In 2027, the saver’s credit will transition to what will be known as the saver’s match.

What are the Contribution Deadlines for the Saver’s Credit?

Employers should inform their employees that they have until the April 15 deadline to contribute to an IRA for 2023 and potentially qualify for a special tax credit, per IRS guidelines.

Individuals with employer-sponsored retirement plans still have the opportunity to contribute to their retirement savings in a way that qualifies them for the Saver’s Credit on their 2023 tax filings. Contributions to these plans, known as elective deferrals, need to be completed by December 31.

Who is Eligible for the Retirement Savings Contributions Credit?

In the 2024 legislation, there have been some changes, especially in the income limits and credit rates, which are important to note for eligibility and calculation of the credit amount.

Eligibility remains consistent for those who are 18 or older, not a full-time student, and not claimed as a dependent on another person’s tax return. Contributions must be to a retirement plan or IRA account, falling under the adjusted gross income caps set by the IRS each year.

For the year 2023, to be eligible for the 50% credit, single filers must have an adjusted gross income (AGI) of no more than $21,750, and married couples filing jointly must not exceed $43,500. As income levels rise, the credit rate decreases to 20% and then 10%, ultimately phasing out completely for individuals earning above $36,500 and couples earning more than $73,000.

For 2024, the AGI limits for claiming the Saver’s Credit have been adjusted. Married couples filing jointly can have an AGI up to $76,500, heads of household up to $57,375, and all other filers up to $38,250.

Reach out to VantagePoint to learn more ways we can help employers increase their employee take-home pay and increase deductions for the employer.

2023 Saver’s Credit eligibility (taxes filed in 2024)

Saver’s Credit rate	Married filing jointly	Head of household	Single filers
50% of eligible contributions	AGI of no more than $43,500	AGI of no more than $32,625	AGI of no more than $21,750
20% of eligible contributions	$43,501 – $47,500	$32,626 – $35,625	$21,751 – $23,750
10% of eligible contributions	$47,501 – $73,000	$35,626 – $54,750	$23,751 – $36,500
0% of eligible contributions	More than $73,000	More than $54,750	More than $36,500

Source: “Retirement Savings Contribution Credit (Saver’s Credit),” IRS.gov.

2024 Saver’s Credit eligibility (taxes filed in 2025)

Saver’s Credit rate	Married filing jointly	Head of household	Single filers
50% of eligible contributions	AGI of no more than $46,000	AGI of no more than $34,500	AGI of no more than $23,000
20% of eligible contributions	$46,001 – $50,000	$34,501 – $37,500	$23,001 – $25,000
10% of eligible contributions	$50,001 – $76,500	$37,501 – $57,375	$25,001 – $38,250
0% of eligible contributions	More than $76,500	More than $57,375	More than $38,250

Source: “401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000,” IRS.gov.

How much do you have to contribute to get the Saver’s Credit?

To qualify for the Saver’s Credit, no minimum contribution is required, making even modest savings in eligible retirement accounts beneficial for tax reductions. The credit considers up to $2,000 of contributions for single filers and $4,000 for those filing jointly, translating to a maximum credit of $1,000 or $2,000, respectively, if 50% of contributions are applicable.

Lower percentages of applicable contributions yield correspondingly smaller credits, with maximums of $400 or $200 for single filers at 20% and 10% rates, and double those amounts for joint filers.

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How much do you have to contribute to get the Saver’s Credit?

Lower percentages of applicable contributions yield correspondingly smaller credits, with maximums of $400 or $200 for single filers at 20% and 10% rates, and double those amounts for joint filers.

How to Access the Saver’s Credit

To access the Saver’s Credit, one must deposit into a qualifying retirement account by the specified deadline for that tax year. Contributions to employer-sponsored plans like 401(k)s need to be made by year-end, while contributions to Individual Retirement Accounts (IRAs) can be made up until the tax filing deadline of the next year, typically April 15.
To claim the credit, employers need to inform employees to fill out and submit Form 8880, titled “Credit for Qualified Retirement Savings Contributions,” with their tax return.

If you’re unsure about your eligibility or how to accurately fill out the form, VantagePoint Benefit Administrators is here to help. Even if your income level prevents you from claiming the Saver’s Credit, you can still enjoy other tax advantages offered by eligible retirement accounts.

How to Use the Saver’s Credit

Upon receipt, this credit becomes part of your tax refund. You have the option to allocate these extra funds towards a retirement account contribution for the current year. This action could potentially qualify you for the Saver’s Credit once more in the next year, depending on the updated Adjusted Gross Income (AGI) thresholds.

Starting in 2027, under the SECURE Act 2.0, this credit will automatically be applied as a direct deposit into the qualifying account that received the contributions, streamlining the process.

Consider advising your employees to prepare their tax returns to determine their Adjusted Gross Income (AGI) and assess their eligibility for the saver’s credit. If they qualify and haven’t yet maxed out their IRA contributions for the year, it could be beneficial for them to make additional contributions to potentially increase their tax credit.

Moreover, contributing to a traditional IRA might also lower their AGI, which is particularly advantageous if they are on the verge of qualifying for the Saver’s Credit. This could not only help them qualify for the credit but also reduce their overall taxable income. Encourage them to invest in their IRA, which supports their future financial security.

Our team of experts is here to help, don’t hesitate to reach out!

Retirement Savings Contributions Credit (The Saver’s Credit)