Savers Credit: What It Is, Who Can Claim It and How to Claim It

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Saving for retirement is necessary, but some people don’t take it seriously and some are unable to do so due to their low income. There is, however, a credit that aims to encourage such people to save for retirement. This credit, called Retirement Savings Contributions Credit or Savers Credit, can lower the amount of taxes owed.

What is savers credit?

It is a credit that low- and moderate-income individuals could claim for making qualified contributions to eligible retirement accounts. Retirement accounts that qualify for this credit are – traditional or Roth IRA, 401(k), SIMPLE IRA, SEP IRA, 403(b) or 457(b), ABLE account, SEP IRA and more.

The Retirement Savings Contributions Credit is a nonrefundable credit, meaning it can only reduce the taxes for eligible taxpayers, and in no case will taxpayers get the refund even if the credit exceeds the tax liability. 

Moreover, this credit is not like a tax deduction. A tax deduction lowers the income that is subject to tax, but a tax credit gives eligible taxpayers a dollar-for-dollar reduction in the amount owed.

The amount of credit depends on taxpayers’ contribution to retirement accounts and their income level (adjusted gross income). A taxpayer can receive a credit of 10%, 20%, or 50% on the first $2,000 ($4,000 for joint filers) contribution towards eligible retirement accounts. This means that the maximum credit that a single filer can receive is $1,000 ($2,000 for married couples filing jointly).

It must be noted that rollover contributions don’t qualify for the credit, but if a taxpayer has taken distributions from retirement accounts, it could reduce eligible contributions for the credit.

Who can claim the savers credit?

To claim the Savers Credit, a person must be aged 18 or above, not be claimed as a dependent and must not be a full-time student. A student is someone enrolled full-time at a school or registered in an on-farm training program.

Also, applicants need to meet the income limits. The income limits vary depending on applicants’ tax filing status. For instance, the income cap is $73,000 for joint filers in the tax year 2023 ($36,500 for single filers and $54,750 for heads of household). The taxpayer’s income also determines how much credit a person can claim.

Apart from the above requirements, the applicant must also make a retirement plan or IRA account contribution to qualify for the credit. Alternatively, taxpayers’ can use tax software, which will tell them whether or not they qualify for the credit based on their AGI and filing status.

How to claim the Savers Credit

Taxpayers need to complete Form 8880 (Credit for Qualified Retirement Savings Contributions) when filing a tax return to claim the saver’s credit. The form requires information on eligible contributions made by the taxpayer and their spouse, if applicable.

Moreover, the form offers detailed instructions on how to calculate the total credit. After calculating the credit, you need to add it to line 4 of Form 1040.

Further, to claim the Retirement Savings Contributions Credit, it is mandatory for the taxpayer to make contributions to an eligible retirement account by the deadline. The deadline is usually the end of the calendar year for a workplace plan like a 401(k).

Those using IRAs can make qualifying contributions in the prior tax year until the annual tax filing deadline, which is usually April 15.

How much to contribute

There is no minimum contribution requirement to qualify for the savers credit. Even small contributions in eligible retirement accounts could help taxpayers get the credit.

Though there is no minimum contribution amount, there is a maximum contribution amount, and it is $4,000 for joint filers and $2,000 for single filers. With the maximum contribution, the maximum credit (50% credit) will be $1,000 for single filers and $2,000 for joint filers.

Similarly, those who qualify for a 20% credit could get a maximum credit of $400 ($800 for joint filers), while those who qualify for 10% will get a credit of up to $200 ($400 for joint filers).


Mr. A is a single filer and made $23,000 in 2023. He contributed $2,000 towards his 401(k), reducing his AGI (adjusted gross income) to $21,000, making him eligible for the 50% contribution credit. So, Mr. A will qualify for a saver’s credit of $1,000.

Mr. X and Mrs. Y are married and file jointly. In 2023, Mr. X earned $20,000 and contributed $2,000 to an IRA, while Mrs. Y made $23,000 and contributed $2,000 to her 401(k). The total adjusted gross income for the couple is $39,000. This means they qualify for a credit of 50% of their retirement contributions, i.e., $2,000.

Mr. C made $45,000 in tax year 2023 and filed jointly with his wife, who made no income. Mr. C contributed $100 to his 403(b) plan and $50 to his traditional IRA monthly. His total annual contribution is $1,800. The total income of the couple after making adjustments makes them eligible for a 20% credit, i.e., $360.

Changes to Retirement Savings Contributions Credit

Starting in 2027, the Savers Credit will be replaced by a new program called “Saver’s Match.” The new program will do away with the credit for making contributions to eligible retirement accounts.

Under the new program, people contributing to a workplace retirement plan or IRA will receive 50% (up to $2,000) directly into their retirement plan. To qualify for a saver’s match a person needs to have an income of $35,000 or less ($71,000 or less for married filing jointly; $53,250 or below for head of household).