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How the Saver’s Credit Works

The saver's credit helps eligible taxpayers offset the cost of saving for retirement.
Oct. 4, 2018
Income Taxes, Taxes
Can You Take the Saver's Credit?
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Uncle Sam wants you to save for retirement — so much so that he offers a tax credit for doing so.

It’s called the retirement savings contribution credit — the “saver’s credit” for short — and it’s available for mid- and low-income taxpayers who save for retirement.

Who is eligible for the saver’s credit

You’re eligible for the saver’s credit if you are 18 or older, not a full-time student and not claimed as a dependent on another person’s tax return.

But that doesn’t necessarily mean you get it: You must also make a retirement plan or IRA account contribution, and fall under maximum adjusted gross income caps the IRS sets each year.

If your adjusted gross income is above any of these thresholds in 2018, you aren’t eligible for the saver’s credit:

  • $63,000 as a married joint filer
  • $47,250 as a head of household filer
  • $31,500 as any other filing status

» Not eligible? An IRA has tax perks of its own. Learn more about these accounts.

What the saver’s credit is worth

The saver’s credit is worth up to $2,000, or $4,000 for married couples filing jointly. Keep in mind that a credit is not the same as a tax deduction — it’s better: While a tax deduction just reduces the amount of your income that is subject to taxes, a tax credit reduces your actual tax bill dollar-for-dollar. (Read a detailed rundown of tax credits versus tax deductions.)

The saver’s credit is worth up to $2,000, or $4,000 for those married filing jointly.

The value of the saver’s credit is calculated based on your contributions to a traditional or Roth IRA, 401(k), SIMPLE IRA, SARSEP, 403(b) or 457(b) plan. (New in 2018: Contributions to ABLE accounts — tax-advantage savings accounts for people with disabilities and their families — are also eligible.) You may be eligible for 50%, 20% or 10% of your contribution amount, depending on your filing status and adjusted gross income.

To qualify for the saver’s credit, the contribution must be new money; in other words, rollovers from an existing account — like a 401(k) rollover into an IRA — don’t count.

» View NerdWallet’s picks for the best IRA accounts

Saver’s credit rates for 2018

Married filing jointly
50% of contribution20% of contribution10% of contribution
AGI of $38,000 or below$38,001 - $41,000$41,001 - $63,000
Head of household
50% of contribution20% of contribution10% of contribution
AGI of $28,500 or below$28,501 - $30,750$30,751 - $47,250
Other filers
50% of contribution20% of contribution10% of contribution
AGI of $19,000 or below$19,001 - $20,500$20,501 - $31,500

Calculating the value of the saver’s credit

Unlike many IRS rules, the math here is fairly simple: The credit is worth 50%, 20% or 10% of your total contribution, but the total credit is capped at $2,000 (or $4,000 if you’re married filing jointly).

Let’s say you earn $19,000 as a single filer in 2018, and you contribute $1,000 to an eligible account. The value of your saver’s credit would be $500. If you managed to contribute $5,000 to an eligible account, your credit would be worth $2,000, due to the cap.

If your contribution was made to a traditional IRA, 401(k) or other account that offers a tax deduction for contributions, your taxable income would also be reduced by the amount of your contribution.

» Learn more tax-advantaged retirement accounts: Traditional IRA vs. Roth IRA

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