Mary Beth’s Corner

Saver’s Tax Credit

IRS Notices, Participant Services
October 28, 2022

Most know that making eligible contributions to your IRA or employer-sponsored retirement plan may be tax deductible, but did you know that you may also be eligible for a tax credit?

Read below for details on who is eligible, the tax credit amount and a breakdown of contribution percentages against your respective Adjusted Gross Income (AGI).

Who Is Eligible?

You’re eligible to take a tax credit if you meet the following criteria:

Ages 18 or older
Not claimed as a dependent on another person’s tax return
Not a student

You qualify as a student if during any part of the 5 calendar months of the tax year you:

Were enrolled as a full-time student at a school
Took a full-time, on-farm training course given by a school or a state, county, or local government agency.

*A school includes technical, trade, and mechanical schools. It does not include on-the-job training courses, correspondence schools, or schools offering courses only through the Internet.*

Credit Amounts

Your AGI reported on your 1040 Form series return determines if the credit amount is 50%, 20% or 10% of:

Contributions you make to a traditional or Roth IRA,
Elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan,
Voluntary after-tax employee contributions made to a qualified retirement plan (including the federal Thrift Savings Plan) or 403(b) plan,
Contributions to a 501(c)(18)(D) plan, or
Contributions made to an Achieving a Better Life Experience (ABLE) account for which you are the designated beneficiary (beginning in 2018).

The saver’s credit is a nonrefundable federal income tax credit available to individuals with an adjusted gross income (AGI) of less than $73,000. Salary-deferral contributions to a 401(k), 403(b), governmental 457(b), SIMPLE IRA, and SAR SEP can reduce an individual’s AGI, creating Saver’s Tax Credit eligibility.

The credit is available for contributions to a traditional or Roth IRA, rollover contributions do not qualify for the tax credit. The maximum annual contribution eligible for the credit is $2,000 ($4,000 if married filing jointly), and the maximum credit is 50%, making the maximum saver’s credit $1,000 ($2,000 if married filing jointly).

Use the chart below or click here to calculate your credit.