Saving for retirement is even more rewarding if you qualify for the Retirement Savings Contribution Credit – a.k.a., the Saver's Credit. This tax break is designed to encourage people with low and middle incomes to begin building their retirement nest egg. In fact, for those who qualify for the Saver's Credit, the lower your income, the higher the percentage of retirement plan contributions you get back on your tax return.
Also note that people with disabilities who have an ABLE account may also qualify for the Saver's Credit.
Who qualifies for the Saver's Credit?
For the 2023 tax year, single filers and married people filing a separate return with modified adjusted gross income (MAGI) of $36,500 or less may be eligible. Married couples filing jointly must have a modified AGI of $73,000 or less, while head-of-household filers must have a modified AGI of $54,750 or less.
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However, some people can't claim the Saver's Credit, regardless of income. Taxpayers under 18 years of age, full-time students, and anyone claimed as a dependent on someone else's tax return aren't eligible. You're considered a "full-time student" for purposes of the Saver's Credit if, during any part of five months of the year, you:
- Were enrolled as a full-time student at a school (including a technical, trade, or mechanical school); or
- Took a full-time on-farm training course offered by a school or a state, county, or local government agency.
How much is the Saver's Credit?
If your income falls within the limits, you can claim a tax credit worth up to $1,000 for single filers or $2,000 for joint filers. The credit is based on 10%, 20% or 50% of the first $2,000 ($4,000 for joint filers) you contribute to retirement accounts, including 401(k)s, traditional IRAs and Roth IRAs (although rollover contributions don't count).
The following table shows which percentage you would use for the 2023 tax year, depending on your income and filing status.
| Married Filing Jointly | Head-of-Household | Other Filing Statuses | Percentage of Contribution Allowed |
| AGI of $43,500 or less | AGI of $32,625 or less | AGI of $21,750 or less | 50% |
| AGI of $43,501 to $47,500 | AGI of $32,626 to $35,625 | AGI of $21,751 to $23,750 | 20% |
| AGI of $45,501 to $73,000 | AGI of $35,626 to $54,750 | AGI of $23,751 to $36,500 | 10% |
| AGI over $73,000 | AGI over $54,750 | AGI over $36,500 | 0% |
There's one less-than-desirable aspect of the Saver's Credit – it's a "nonrefundable" credit. That generally means the credit is only worth as much as the tax you owe. In other words, the credit can't reduce your tax liability below $0 or generate a tax refund all by itself. For example, if you owe $500 of tax before applying the credit, but you qualify for a $750 Saver's Credit, you won't owe any tax, but you won't be getting a refund for $250, either.
How to claim the Saver's Credit
To claim the credit, you first need to complete Form 8880 (Credit for Qualified Retirement Savings Contributions) to calculate the amount of your credit. You will then report the credit amount on your federal Form 1040. Make sure you attach Form 8880 when you file your return.
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