Retirement Savings Contribution Credit (Saver's Credit)

Low to middle income taxpayers may claim the retirement savings contribution credit, usually called the saver's credit, if they make eligible contributions to certain tax-advantaged retirement plans.

The credit may be up to $1,000 for a contribution of $2,000, although because the credit is nonrefundable, the maximum amount will be limited by your tax liability. The credit may be 10%, 20%, or even 50%, of contributions of up to $2,000, depending on filing status and modified adjusted gross income (MAGI), which is adjusted gross income (AGI) increased by any exclusion for foreign earned income or income from Puerto Rico or American Samoa, or by any foreign housing exclusion or deduction. For most Americans, MAGI = AGI.

To be eligible for the credit, you must be at least 18 years of age by the end of the tax year and cannot be claimed as a dependent by someone else, nor can you be a full-time student during 5 or more months during the tax year.

Eligible retirement accounts include:

A designated beneficiary of an ABLE (A Better Life Experience) account may also claim the savers credit for contributions.

Upper MAGI Limits for Each Saver's Credit Percentage
Credit % Single,
Married Filing
Separately,
Qualifying
Widower
Head
of
Household
Married
Filing
Jointly
2025
50% $23,750 $35,625 $47,500
20% $25,500 $38,250 $51,000
10% $39,500 $59,250 $79,000
2024
50% $23,000 $34,500 $46,000
20% $25,000 $37,500 $50,000
10% $38,250 $57,375 $76,500
2023
50% $21,750 $32,625 $43,500
20% $23,750 $35,625 $47,500
10% $36,500 $54,750 $73,000

Source: Retirement Savings Contributions Savers Credit

The saver's credit is in addition to tax benefit of the retirement contribution if the contribution is to a tax-deferred account, such as a traditional IRA:

Total Tax Savings = Saver’s Credit + Retirement Contribution × Marginal Tax Rate

Example: Total Tax Savings = Saver's Credit + Marginal Tax Savings

Wage $29,000
Retirement Contribution $7,000
Adjusted AGI $22,000 Qualifies for 50% Credit Rate
Credit Rate 50%
Saver's Credit $1,000 = 50% × Lower of (Contribution or $2,000)
Marginal Tax Rate 10%
Marginal Tax Savings $700 = Retirement Contribution × Marginal Tax Rate
Total Tax Savings $1,700 = Saver's Credit + Marginal Tax Savings

If you also qualify for the Premium Tax Credit (Obamacare Credit), then lowering your AGI with a retirement contribution will also increase your Premium Tax Credit, increasing your tax savings even more.

A married couple filing jointly can each claim the credit for eligible contributions of up to $2,000 each. Contributions can be made by the due date of the return, not including extensions.

Example: Calculating the Saver's Credit for a Married Couple Filing Jointly

Starting in 2027, you may receive a federal matching contribution on your retirement contribution that must be deposited in your IRA or retirement plan and cannot be withdrawn without penalty. This benefit replaces the saver's credit, but unlike the saver's credit, it is not limited by tax liability.

Although you can receive this government match by contributing either to a traditional IRA or a Roth IRA, the government match must be placed in a traditional IRA or other tax-deferred account. The government giveth, but then it wants to taketh some of that away later.

Like the saver's credit, the match phases out based on income, adjusted annually for inflation:

To prevent taxpayers from receiving a distribution, then making a subsequent contribution to claim the saver's credit, tax rules reduce the eligible contribution by any distributions within the testing period, which covers the time beginning 2 years before the tax year until the due date of the current return, including extensions. So any distributions from retirement plans in 2022 and 2023 will reduce or eliminate any retirement credit that can be claimed for 2024, up until the due date of the 2024 return in 2025, including extensions. Any distributions during that time period must be subtracted from contributions made during the tax year. However, trustee-to-trustee transfers to other eligible retirement accounts, such as rollover distributions or a conversion of a traditional IRA to a Roth IRA, or distributions of excess contributions, are not counted.

Example: Calculating the Saver's Credit after Withdrawing a Retirement Contribution in a Previous Year

The saver's credit is figured on Form 8880, Credit for Qualified Retirement Contributions. Because the saver's credit is limited to ordinary income tax liability, not employment tax liability, other credits that you can claim, such as the child tax credit, dependent care credit, American opportunity credit, and the lifetime learning credit, will limit the credit available.

Historical Notes