Do You Qualify for the Retirement Saver’s Tax Credit?

Posted by Amanda on January 17, 2011

Everyone wants to secure a comfortable and stable financial future for themselves and their families. However, saving for retirement may seem like a pipe dream if you are struggling just to pay your day-to-day bills.

Even with low income, you can still set aside money for your retirement through the Savers Tax Credit. If you qualify for the savers credit, you will receive an income tax credit of up to 50% of the first $2,000 you contribute to a retirement plan.

Do You Qualify for The Savers Credit?

You can claim a percentage of the amount you contribute to a qualified retirement fund if you have an income of less than $31,000 for single filers, less than $46,500 for head of household filers, and less than $62,000 if married filing jointly in 2017. If you qualify, follow the steps below to receive your credit. See all the income limits.

Contribute to a Retirement Plan

You will need to contribute to a qualified retirement plan in order to claim the Saver’s Tax Credit. This includes a Traditional or Roth IRA, a 401(K) plan, 403b or 457, SEP, or SIMPLE plan, (c) voluntary employee contributions to a qualified retirement plan as defined in section 4974(c) (including the federal Thrift Savings Plan), or (d)contributions to a 501(c)(18)(D) plan.

If you do not have the money to open a retirement account, use all or part of this year’s tax refund to fund a new retirement account. By doing this, you set yourself up to receive the saver’s tax credit for next year (if your income remains under the limits). Then use part or all of next year’s tax refund to fund your retirement account again. In this way, you can begin a cycle of funding a retirement account and receiving part of your money back as a tax credit without wrecking your monthly budget.

File the Paperwork

To claim the federal savers credit you will need to fill out the savers credit form, the Form 8880 when you file your income taxes.

For more information on the retirement savers credit, check out the publication 590.

Retirement Tax Credit Tips

Here are a few tips to maximize the IRS savers credit from Madison:

You can still contribute for the savers credit last year. In addition, because the IRA contribution tax deadline isn’t until April, you can use your refund to fund an IRA for last year and qualify for the retirement contribution credit all in the same tax year.

Stack tax credit and deduction. The savers tax credit is in addition to any deductions you already receive for retirement plan contributions. For example, you can claim the IRA contribution credit and an IRA deduction, as long as you qualify for both. You’ll also receive the deferral benefits for retirement plans in addition to the IRS retirement credit.

Lower your income. Even if your actual income doesn’t meet the savers credit eligibility, you may still qualify because the credit is based on adjusted gross income. It’s important to see how close you are to the income guidelines, as a few additional deductions could qualify you for the saver’s credit.

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Comments to Do You Qualify for the Retirement Saver’s Tax Credit?

  1. You mentioned, “Even if your actual income doesn’t meet the 2010 savers credit eligibility, you may still qualify because the credit is based on adjusted gross income. It’s important to see how close you are to the income guidelines, as a few additional deductions could qualify you for the saver’s credit.”

    Do contributions to a regular (not Roth) IRA lower your AGI?


    • Hi Laura,
      Yes the regular IRA contributions lower your AGI!

      That’s the best part about the retirement savers credit.

      You can use an IRA contribution itself just to qualify, then get extra money back in the form of the deduction plus the savers credit.


      • That is awesome! Have you written an article on how to calculate your AGI? I am having trouble finding all the deductions used in the calculation.


      • Laura,

        Here’s an article that helps you calculate your AGI: What is Your Adjusted Gross Income?


  2. I agree, downsizing is very important when it comes to retirement. A lot of people have these great retirement fantasies, which are too high-priced. Some people might need to retire to another state where the price of living is cheaper. While money is important, planning for retirement isn’t all about money. It is a great idea to get a certified retirement financial advisor. Life after retirement should be very enjoyable. No one should spend time worrying about finances, but rather do things that they enjoy and now have time to do. These certified advisors will help to prevent stressful retirements.


  3. Even more help for the poor that take up the majority of social services. Why even take the taxes out of a paycheck if they are making less than $9.00 an hour. It sure would save many people a lot of time and energy.


  4. H&R block is telling me that because i payed less in taxes than im entitled to by the savers credit ($1,000), that i cant get the credit. how does that make any sense?


  5. I took $30,000 out as a loan of a retirement fund to have a down payment for a first house. I paid the 10% early withdrawal fee, but I didn’t pay income tax on the $30K, as it was to buy a house. I have not left that employment and cannot make any more contributions to the plan. We are, however, making a $300 a month “loan payment” essentially repaying ourselves. At the moment – and I’m self employed – it’s the only contributions – if that is the word – we are making to any retirement plan. Can those monies count for the “Savers Credit?”


    • Tom,
      It doesn’t appear to have been a loan if you paid a withdrawal fee. So the $300 contributions aren’t loan payments correct? (You are just calling it that for your own mental accounting right?) What type of plan are the $300 contributions going to?


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