If you don’t make much money but voluntarily save for retirement through certain types of retirement accounts, you can claim the Saver’s Credit. The credit can reduce your tax bill to zero, but it’s not refundable if anything is left over.
The Saver’s Credit — formerly called the Retirement Savings Contributions Credit — lets you claim up to 50% of the first $2,000 (most filers) or $4,000 (married filing jointly) that you contribute to an eligible account. Eligible accounts are: a 401(k) 403(b) or 457 plan; a Simple IRA or a SEP IRA; a traditional IRA or a Roth IRA.
How great a percentage of that $2,000 or $4,000 you can take depends on your filing status and your adjusted gross income. Your AGI must fall under these thresholds for the 2015 tax year:
Saver's Credit Income Limits
| Credit | AGI limit, Married Filing Jointly | AGI limit, Head of Household | AGI limit, all other filers* |
|---|---|---|---|
| 50% | $36,500 or less | $27,375 or less | $18,250 or less |
| 20% | $36,501-$39,500 | $27,376-$29,625 | $18,251-$19,750 |
| 10% | $39,501-$61,000 | $29,626-$45,750 | $19,751-$30,500 |
* Single, married filing separately and qualifying widow(er)
More details
Many employers implement these plans and withhold your contribution directly from your paycheck at your request.
The credit applies only to your own contributions; you aren’t allowed to claim any portion of matching contributions made by your employer.
You also can’t claim any rollover contributions — money you moved from another retirement plan or IRA — toward the credit. However, you are allowed to open a new account or to make additional contributions to an existing retirement account through the April deadline for your return to the IRS.
Forms, requirements and special rules
- You can claim the credit only if you’re filing Form 1040, 1040A or 1040NR. You can’t claim the Saver’s Credit if you file Form 1040-EZ.
- You must be 18 or older.
- You can’t have been a full-time student in 2015.
- You can’t be claimed as a dependent on another person’s return.
- Your claim for the credit is reported on Form 8880, Credit for Qualified Retirement Savings Contributions. When you file your taxes online, most preparers will ask questions about your savings and calculate the credit for you.
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