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What Is the Saver’s Tax Credit?
The Saver’s Tax Credit, also known as the Credit for Qualified Retirement Savings, is designed to encourage low- and moderate-income taxpayers to save for retirement. This credit can reduce your tax bill dollar for dollar by up to $1,000, or $2,000 if you’re married and filing jointly. The credit is calculated as a percentage of up to $2,000 in contributions ($4,000 for joint filers) and decreases as your adjusted gross income (AGI) increases, ranging from 0% to 50%.
Who Qualifies for the Saver’s Credit?
To be eligible for the Saver’s Credit, you must be at least 18 years old, not claimed as a dependent on another person’s tax return, and not a full-time student. Eligible contributions can be made to a traditional or Roth IRA, an employer-sponsored retirement plan (such as a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE), or an ABLE account where you are the designated beneficiary. Note that rollover contributions are not eligible, and your eligible contribution may be reduced if you received distributions from a retirement or ABLE account.
How Does the Saver’s Credit Work?
To determine if you qualify for the Saver’s Credit and the amount you can claim, refer to the charts below based on your filing status and adjusted gross income.
2022 Saver’s Credit
| Credit Amount | Married Filing Jointly | Head of Household | Single, Married Filing Separately & Qualifying Widow(er) |
|---|---|---|---|
| 50% | AGI up to $41,000 | AGI up to $30,750 | AGI up to $20,500 |
| 20% | $41,001 – $44,000 | $30,751 – $33,000 | $20,501 – $22,000 |
| 10% | $44,001 – $68,000 | $33,001 – $51,000 | $22,001 – $34,000 |
| 0% | $68,001 and up | $51,001 and up | $34,001 and up |
2023 Saver’s Credit
| Credit Amount | Married Filing Jointly | Head of Household | Single, Married Filing Separately & Qualifying Widow(er) |
|---|---|---|---|
| 50% | AGI up to $43,500 | AGI up to $32,625 | AGI up to $21,750 |
| 20% | $43,501 – $47,500 | $32,626 – $35,625 | $21,751 – $23,750 |
| 10% | $47,501 – $73,000 | $35,626 – $54,750 | $23,751 – $36,500 |
| 0% | $73,001 and up | $54,751 and up | $36,501 and up |
Other Tax Credits to Consider
The federal government offers various refundable and nonrefundable tax credits to help reduce your tax burden. Refundable credits provide money back if the credit exceeds your tax liability, while nonrefundable credits do not.
Earned Income Tax Credit
Low- and moderate-income taxpayers may benefit from the Earned Income Tax Credit, a refundable credit worth $560 to $6,935 in 2022 or $600 to $7,420 in 2023. To qualify, you must have worked and earned less than $59,187, with investment income of less than $10,300 in the 2022 tax year.
Child and Dependent Care Credit
If you paid for child care or care for another dependent to work or look for work, you might be eligible for the Child and Dependent Care Credit. This nonrefundable credit is equal to 20% to 35% of your work-related care expenses up to $3,000 for one dependent or $6,000 for two or more dependents.
Lifetime Learning Credit
Students or parents of students may receive a nonrefundable Lifetime Learning Tax Credit of up to $2,000 for qualifying post-secondary educational expenses. Income limits apply.
The Bottom Line
Not every taxpayer qualifies for the Saver’s Credit. However, if you do, you could save hundreds or even thousands of dollars on your tax bill and enjoy an added incentive to plan for your future, courtesy of the U.S. government. In 2027, the Saver’s Credit is expected to reboot as the Saver’s Match, adding up to $1,000 ($2,000 for married couples filing jointly) to a qualifying taxpayer’s retirement account as an incentive to save.
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