Saver’s Credit – Get up to a 50% Return for Saving Money

The Saver’s Credit is a great deal and allows you to get a tax credit of up to 50% of your savings if you qualify. Using the Saver’s Credit you may be able to take the credit of up to $1,000 (up to $2,000 if filing jointly) if you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans. Here is a table showing what your credit would be depending on your filing status  and income.

Single AGI

Head of Household AGI

Joint File AGI

0-17000: 50%

0-25550: 50%

0-34000: 50%

17001-18250: 20%

25551-27375: 20%

34001-36500: 20%

18251-28250: 10%

27376-42375: 10%

36501-56500: 10%

The Saver’s Credit is a great deal but as you can see it would be pretty hard to end up in the 50% bracket.  In addition to the income restrictions there are also an age requirement. For this tax year you have to be born before January 2, 1993, you cannot have been a full-time student during the calendar year and cannot be claimed as a dependent on another person’s return.

Another thing to keep in mind is if you don’t owe any taxes than this credit won’t do you any good. You can’t get a refund of the credit itself. The best it can do is reduce your taxes to zero which should result in an increased refund.  Last year my wife and I were eligible for this credit but with our exemptions and child tax credit our tax liability was already at zero so this credit did us no good. Since we have one less exemption and one less child tax credit this year I’m sure we will have some tax liability to reduce this year.

My wife and I might actually end up being in the 50% bracket this year.  I still haven’t totaled our income from last year.  Given the relatively narrow income range for married filing jointly it is also possible that we will be in the 10% bracket.

If you don’t make a lot of money and you contribute to a qualified retirement account make sure to determine whether you qualify for this credit. You can read more about the Saver’s Credit at the IRS website.

4 thoughts on “Saver’s Credit – Get up to a 50% Return for Saving Money”

  1. A quick look at the AGI tables above will let you know whether you qualify. Even if you don’t have to pay taxes because you have had enough withheld during the year you can still get the Saver’s Credit as long as you have some tax liability.

  2. The Saver’s Credit is great … if you qualify. Unfortunately, as you mention, it only applies to a narrow segment of taxpayers.
    Another credit that is really important to people in this income bracket is the Earned Income Tax Credit (EITC). It is a refundable tax credit, which means you’ll receive a tax refund regardless of tax liability … pretty sweet.

    1. I’m not sure what you mean by it applying to only a narrow segment of taxpayers. It isn’t a narrow segment of taxpayers who qualify for the credit but it is a narrow segment who can actually benefit from the credit.

      The EITC is also a nice credit, especially since it is refundable. Unlike the Saver’s Credit the IRS will actually determine the EITC for you so you don’t have to worry as much about overlooking the credit.

  3. Hmm I have never heard of this credit. Normally I have the government take out more than is needed so that I do not have to pay taxes at the end of the year, probably why I never heard of this, very informative though.

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