The retirement savers tax credit, also known as the saver's credit, is a tax break available to certain US taxpayers who contribute to qualified retirement accounts. Here's a breakdown:
Who is eligible?
You must have earned income and file a Form 1040, 1040-SR, or 1040-NR tax return.
Your adjusted gross income (AGI) must be below specific limits, which vary depending on your filing status:
Single: $36,500 or less
Head of household: $54,750 or less
Married filing jointly: $73,000 or less
You cannot be claimed as a dependent on someone else's tax return and you cannot be a full-time student.
What contributions qualify?
Contributions to traditional or Roth IRAs
Elective salary deferrals to employer-sponsored plans like 401(k), 403(b),governmental 457(b), SARSEP, or SIMPLE plans
Certain voluntary after-tax contributions to qualified retirement plans
Contributions to an ABLE account for which you are the designated beneficiary (up to $14,000 for 2023)
How much is the credit?
The credit is a percentage of your qualified contributions, up to a maximum:
50% for certain low-income taxpayers
20% for moderate-income taxpayers
10% for higher-income taxpayers eligible for the credit
The maximum dollar amount of the credit is:
$1,000 for single filers and heads of household
$2,000 for married couples filing jointly
How do I claim the credit?
Use Form 8880 to figure out the amount of your credit.
Claim the credit on your tax return (Schedule 1 for Form 1040).
The credit is non-refundable which means it can only reduce the tax liability that you owe. If you don't owe any tax, you wouldn't qualify for the credit.
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