WASHINGTON, D.C. — The Internal Revenue Service (IRS) is emphasizing the importance of retirement savings for low- and moderate-income taxpayers by reminding them of the benefits of the Saver’s Credit. Designed to encourage contributions to retirement plans, this tax credit can serve as a financial incentive while promoting long-term financial stability.
The Saver’s Credit, formally known as the Retirement Savings Contributions Credit, allows eligible taxpayers to offset a portion of the first $2,000 of contributions to qualifying retirement plans. Married couples filing jointly may receive the credit for up to $4,000 of contributions. The maximum credit available is $1,000 for individuals and $2,000 for married couples filing jointly.
More Than a Credit—An Investment in the Future
The Saver’s Credit can help taxpayers reduce their tax liabilities or increase their refunds, offering immediate relief while motivating individuals to save for retirement. Contributions to Individual Retirement Arrangements (IRAs), 401(k) plans, 403(b) plans, and Governmental 457 plans qualify, along with certain others, such as the Thrift Savings Plan for federal employees.
The credit is available to all qualifying taxpayers, including those with disabilities who contribute to Achieving a Better Life Experience (ABLE) accounts, which help individuals with disabilities save for expenses without jeopardizing their government benefits. While rollover contributions are excluded from eligibility, distributions from retirement plans or ABLE accounts reduce the contribution amount used to calculate the credit.
Eligibility and Income Thresholds
The Saver’s Credit is accessible to taxpayers who meet three main criteria:
- They must be at least 18 years old.
- They cannot be claimed as a dependent on another taxpayer’s return.
- They must not be full-time students.
Income thresholds for credit eligibility vary by filing status:
- Married couples filing jointly are eligible with adjusted gross incomes (AGI) of up to $76,500.
- Heads of household qualify with AGI up to $57,375.
- Single filers, married individuals filing separately, and qualified surviving spouses are eligible with AGI up to $38,250.
The IRS encourages taxpayers to use its Interactive Tax Assistant tool to determine their eligibility for the Saver’s Credit. Additionally, taxpayers can consult Form 8880, Credit for Qualified Retirement Savings Contributions, for further guidance.
Deadlines for Contributions
To claim the Saver’s Credit on 2024 tax returns, taxpayers must make contributions to their qualifying accounts by specific deadlines. Contributions to workplace retirement plans should be made by December 31, 2024, and include plans such as:
- 401(k) plans.
- 403(b) plans, typically offered to employees of public schools and certain tax-exempt organizations.
- Governmental 457 plans for state and local government employees.
- Thrift Savings Plans for federal employees.
For individual retirement arrangements (IRAs), taxpayers have until April 15, 2025—the deadline for filing 2024 income tax returns—to contribute to or establish either a traditional or Roth IRA.
How to Make the Most of the Saver’s Credit
The availability of the Saver’s Credit provides a tangible benefit to low- and moderate-income earners who might otherwise face obstacles to saving for retirement. However, taxpayers should consider how their other deductions and credits may interact with the Saver’s Credit, as these can affect the final amount of the credit received. Since the credit is “nonrefundable,” it can reduce the amount owed to zero but cannot result in a negative tax balance.
The IRS’s continuous efforts to publicize initiatives like the Saver’s Credit align with its broader mission of promoting financial literacy and preparedness. By simplifying access to key financial incentives, such as tax credits, the agency aims to make long-term savings achievable, especially for underserved populations.
A Step Toward Financial Security
Programs like the Saver’s Credit serve as critical components of the IRS’s approach to helping taxpayers achieve greater financial security. By rewarding efforts to save for retirement, the initiative supports low- and moderate-income individuals in building their financial futures while providing immediate tax relief. With income limits adjusted annually, the IRS ensures that the Saver’s Credit remains relevant and widely accessible.
The IRS is encouraging all qualifying taxpayers to take full advantage of the program to maximize their refunds or lower their tax burdens in 2025 and beyond. For those who still need to establish an effective savings plan, the Saver’s Credit offers an entry point toward a more stable financial future.
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