The retirement savings Contributions Credit, commonly known as the Saver's Credit, is designed to offset a portion of the first $2,000 that individuals voluntarily contribute to retirement accounts like Individual Retirement Arrangements (IRAs), 401(k) plans, and similar workplace retirement programs. This credit extends to eligible individuals with disabilities who are designated beneficiaries of an Achieving a Better Life Experience (ABLE) account and make contributions to it.
The Saver's Credit has a maximum value of $1,000 (or $2,000 for married couples). While it can enhance a taxpayer's refund or reduce the tax owed, its impact is influenced by other deductions and credits. Notably, distributions from a retirement plan or ABLE account will decrease the contribution amount used in calculating the credit.
Contribution deadlines vary, with individuals having until April 15, 2024—the deadline for filing their 2023 return—to establish a new ira or add funds to an existing one for the 2023 tax year. Both Roth and traditional IRAs are eligible.
Elective deferrals (contributions) to workplace retirement plans must be made by December 31 to plans like 401(k), 403(b) for public school and certain tax-exempt organization employees, Governmental 457 plan for state or local government employees, and Thrift Savings Plan (TSP) for federal employees. Additional details and a list of qualifying workplace retirement plans can be found in the instructions to form 8880, Credit for Qualified Retirement Savings Contributions.
Eligibility for the Saver's Credit is contingent on being 18 years or older, not claimed as a dependent, and not a full-time student. income limits based on adjusted gross income and marital or filing status apply, with 2023 limits set as follows:
- Married couples filing jointly with adjusted gross incomes up to $73,000.
- Heads of household with adjusted gross incomes up to $54,750.
- Married individuals filing separately and singles with adjusted gross incomes up to $36,500.