The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is a tax credit available to eligible taxpayers who contribute to a qualified retirement plan, such as a 401(k), IRA, or similar plan.
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Retirement Savings Contributions Credit Calculator
Maximum Saver’s Credit ?
There is a maximum limit for contributions to retirement plans that makes you eligible for the Saver’s Credit which is fixed at $2,000 for individuals and $4,000 for families.The maximum amount that one claim as Saver’s Credit is $1,000 per individual or $2,000 per married couple filing jointly. The amount of the Credit depends on the taxpayer’s income, filing status, and contribution amount, and ranges from 10% to 50% of the contribution, with a phase-out range for higher incomes.
Is Retirement Savings Contributions Credit refundable?
The Saver’s Credit is a non-refundable tax credit, which can only reduce the taxpayer’s tax liability to zero but not generate a refund on account of this tax credit.It means that the balance of the tax credit will lapse if not adjusted with the current year’s liability.
How to Qualify for the Saver’s Credit?
To qualify for the Retirement Savings Contributions Credit, a taxpayer must meet several criteria:
- You are at least 18 years old and not a full-time student.
- The taxpayer must have a modified adjusted gross income (MAGI) within certain limits given below.
- The taxpayer must contribute directly or through a payroll deduction to a qualified retirement plan.
The contribution must be made by the tax return’s due date (April 18, 2023, for 2022), including extensions, by October 15, 2023, for the 2022 tax year.
How to calculate Retirement Savings Contributions Credit?
The computation of the Retirement Savings Contributions Credit or Saver’s Credit needs the following steps :
- Determine the amount of the qualified contributions made during the tax year, up to the annual limit of $2,000 per person.
- Apply the percentage rate to the contribution amount based on the taxpayer’s income level from the table below :
2023 Retirement Savings Contributions Phaseout Limits
For different filing status, there is a phaseout of the saver’s credit. For the tax year 2023, a single or married filing separately or a head of household person will not get any tax credit if his MAGI is more than $36,500
| Credit Rate | Married Filing Jointly | Head of Household | Single, married filing separately, or qualifying widow(er)ll Other Filers* |
|---|---|---|---|
| 50% of your contribution | AGI not more than $43,500 | AGI not more than $32,625 | AGI not more than $21,750 |
| 20% of your contribution | $43,501- $47,500 | $32,626 – $35,625 | $21,751 – $23,750 |
| 10% of your contribution | $47,501 – $73,000 | $35,626 – $54,750 | $23,751 – $36,500 |
| 0% of your contribution | more than $73,000 | more than $54,750 | more than $36,500 |
2022 Retirement Savings Contributions Limits
| Credit Rate | Married Filing Jointly | Head of Household | Single, married filing separately, or qualifying widow(er) |
|---|---|---|---|
| 50% of your contribution | AGI not more than $41,000 | AGI not more than $30,750 | AGI not more than $20,500 |
| 20% of your contribution | $41,001- $44,000 | $30,751 – $33,000 | $20,501 – $22,000 |
| 10% of your contribution | $44,001 – $68,000 | $33,001 – $51,000 | $22,001 – $34,000 |
| 0% of your contribution | more than $68,000 | more than $51,000 | more than $34,000 |
Saver’s Credit Example
For example, for tax year 2023 , if a Single status Individual contributes $1,500 to a qualified plan and has a MAGI of $35,000 , the applicable percentage rate is 10%. Therefore, the credit amount is $150 ($1,500 x 10%), which can reduce the taxpayer’s tax liability dollar-for-dollar. If the taxpayer’s tax liability is already zero, the Credit cannot be used but can be carried forward for up to five years.
How to Claim the Retirement Savings Contributions Credit on Your Tax Return
To claim the Retirement Savings Contributions Credit on your tax return, you must fill out Form 8880, Credit for Qualified Retirement Savings Contributions, and attach it to your Form 1040 or 1040-SR. The form requires you to enter your contribution amount, filing status, and MAGI, as well as to calculate the credit amount using the IRS tables or the worksheet. You must also report any distributions or rollovers from retirement plans that may affect your eligibility or the credit amount.
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