When saving for retirement, every little bit helps—especially when you can get a tax break. The Retirement Savings Contributions Credit, commonly known as the Saver’s Credit, offers a valuable incentive to encourage individuals to save for their future. This credit allows eligible taxpayers to claim up to $2,000 for contributing to their retirement savings. However, not everyone is taking advantage of it, meaning many could be missing out on a valuable opportunity to reduce their tax burden.
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What is the Saver’s Credit?
The Saver’s Credit, officially known as the Retirement Savings Contributions Credit, provides a tax credit for individuals who contribute to retirement accounts such as IRAs, 401(k) plans, and similar workplace retirement accounts. This credit can cover a portion of the first $2,000 contributed by eligible workers, or $4,000 if married and filing jointly. It also applies to individuals with disabilities who contribute to their Achieving a Better Life Experience (ABLE) accounts.
Why Don’t More People Take Advantage of the Saver’s Credit?
Despite its benefits, the Saver’s Credit remains largely underutilized. Statistics show that only about 12% of eligible taxpayers take advantage of this opportunity. With many people failing to contribute enough to their retirement accounts, this tax credit can be a missed opportunity for substantial savings.
How Much Can You Claim?
The amount of the Saver’s Credit you can claim depends on two factors: the amount you contribute and your income level, as determined by your adjusted gross income (AGI) and filing status.
Tax Credit Percentage Based on Income
- 50% Credit: If you’re married filing jointly with an AGI of $46,000 or less, head of household with $34,500 or less, or single with $23,000 or less, you can claim 50% of your eligible contributions.
- 20% Credit: If your AGI falls between $46,001 and $50,000 for married filers, $34,501 to $37,500 for heads of household, or $23,001 to $25,000 for single filers, you can claim 20%.
- 10% Credit: For individuals with higher incomes—married filers with an AGI between $50,001 and $76,500, heads of household with $37,501 to $57,375, or single filers with $25,001 to $38,250—you can still claim 10%.
- No Credit: If your AGI exceeds $76,500 for married filers, $57,375 for heads of household, or $38,250 for single filers, you will not qualify for the Saver’s Credit.
How Is AGI Calculated?
Your AGI is calculated by taking your total income, including wages, investments, or other sources of income, and subtracting allowable deductions such as retirement contributions or student loan interest, if applicable.
Eligibility for the Saver’s Credit in 2024
To qualify for the Saver’s Credit in 2024, your income and filing status must fall within the following ranges:
- 50% Credit:
- Married filing jointly: AGI of $46,000 or less
- Head of household: AGI of $34,500 or less
- Single: AGI of $23,000 or less
- 20% Credit:
- Married filing jointly: AGI between $46,001 and $50,000
- Head of household: AGI between $34,501 and $37,500
- Single: AGI between $23,001 and $25,000
- 10% Credit:
- Married filing jointly: AGI between $50,001 and $76,500
- Head of household: AGI between $37,501 and $57,375
- Single: AGI between $25,001 and $38,250
- No Credit:
- Married filing jointly: AGI exceeding $76,500
- Head of household: AGI exceeding $57,375
- Single: AGI exceeding $38,250
These income ranges will help determine the percentage of your contribution that is eligible for the credit.
What to Expect for the Saver’s Credit in 2025
In 2025, the eligibility for the Saver’s Credit may be slightly adjusted based on inflation. While the exact numbers will be confirmed by the IRS, here’s a rough idea of what to expect:
- 50% Credit:
- Married filing jointly: AGI up to $47,000
- Head of household: AGI up to $35,250
- Single: AGI up to $23,500
- 20% Credit:
- Married filing jointly: AGI between $47,001 and $51,000
- Head of household: AGI between $35,251 and $38,000
- Single: AGI between $23,501 and $26,000
- 10% Credit:
- Married filing jointly: AGI between $51,001 and $78,000
- Head of household: AGI between $38,001 and $58,250
- Single: AGI between $26,001 and $39,000
- No Credit:
- Married filing jointly: AGI above $78,000
- Head of household: AGI above $58,250
- Single: AGI above $39,000
These changes are estimated and based on typical inflation adjustments, so it’s important to check the official IRS guidelines for the final figures.
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Take Advantage of the Saver’s Credit Today
With 2024 quickly coming to a close, now is the time to make sure you’re taking full advantage of the Saver’s Credit for this year. If you haven’t already, consider contributing to your retirement account before the end of the year. By doing so, you could reduce your taxable income and receive a valuable credit to help fund your retirement.
Plan ahead for 2025 by mapping out your retirement contributions early. This way, you can ensure you’re eligible for the Saver’s Credit and make the most of every opportunity to save for your future.
If you qualify, the Saver’s Credit is an excellent way to boost your retirement savings while reducing your tax bill. Don’t let this tax break pass you by!
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