The retirement savings contribution credit is a valuable tax incentive for low- and moderate-income earners looking to build a nest egg for retirement. It works by offering credit on your taxes for contributions you make to retirement accounts like IRAs or 401(k)s. This means you’ll get a direct reduction in your tax bill for the year, lowering your current tax burden. At the same time, your contributions to your retirement account grow over time, thanks to potential investment gains.

This allows you to accumulate a larger retirement savings balance, which can help you maintain your financial security in your golden years.

Why is this important? Many Americans approach retirement with little saved up at age 55. The Saver’s Credit (also known as retirement savings contribution credit) is a way to address this by making it easier for everyday folks to build a nest egg. A 2023 Transamerica Center for Retirement Studies survey found that over half of U.S. workers need to learn more about this helpful program.

Let’s dive! We’ll break down everything you need to know about the Saver’s Credit, including who qualifies and how much you can save.


What is the Retirement Savings Contribution Credit?

The Saver’s Credit is a special tax break, officially known as the Retirement Savings Contribution Credit. It encourages people with lower to middle incomes to save for their golden years. It works by discounting federal taxes for money put into retirement accounts like IRAs and 401(k)s. This deal makes saving for the future less of a financial burden, hopefully making it more attractive.

Surprisingly, in 2022, only some who could have taken advantage of this credit did. Surprisingly, in 2022, only some who could have taken advantage of this credit did. Suggests that only a few people know about or understand how it works. Depending on your income, you could receive a credit ranging from 10% to 50% of your savings.

The maximum credit is $2,000 for individuals and $4,000 for couples filing jointly. It could mean up to $1,000 back on your taxes as an individual or $2,000 for couples, making retirement savings more rewarding.

Retirement Savings Contribution Credit


Who Can Qualify for the Retirement Savings Contribution Credit?

This incentive, commonly known as the Saver’s Credit, encourages individuals with low to moderate incomes to save for retirement. To qualify for the retirement savings contribution credit, you must meet specific criteria – 


  • Filing Status You must file as single, married, jointly filed, head of household, or qualifying widow(er).
  • Age You must be at least 18 years old.
  • Income Limits Your AGI must fall within certain limits. These limits are adjusted annually and are subject to change. For example, in 2022, the income limits for the credit were $33,000 for single filers, $49,500 for heads of household, and $66,000 for married couples filing jointly.
  • Not a Full-Time Student Someone else cannot claim you as a dependent on their tax return.


💡 Related – What Is a Retirement Money Market Account?


How to Claim the Savings Contribution Credit

Claiming the Saver’s Credit involves a few key steps to ensure you receive this valuable tax benefit. Follow these guidelines to navigate the process smoothly. Understanding the eligibility criteria and preparing the necessary documentation are essential first steps. This preparation will streamline your filing and help you maximize your credit.

Here’s are the steps – 


  • Ensure Eligibility: Verify that your income and filing status meet the criteria for the credit.
  • Make Qualifying Contributions: Contribute to an eligible retirement plan within the tax year.
  • File Your Taxes: You must file a federal tax return, even if you owe no tax or are not otherwise required to file.
  • Complete Form 8880: Use IRS Form 8880, “Credit for Qualified Retirement Savings Contributions,” to calculate and claim the credit on your tax return.


Also, you can read the more in-depth tax forms for retirees

It’s essential to maintain records of your retirement contributions and ensure that your retirement plan qualifies for the credit.


Which Retirement Contributions Qualify for the Tax Credit?

Eligible taxpayers can claim the Saver’s Credit for contributions made to the following types of accounts – 



It’s important to note that not all contributions are eligible for the tax credit. Contributions that exceed the allowable limit face penalties and do not qualify for the Saver’s Tax Credit.

If you change jobs and roll over a 401(k) into another retirement plan, this rollover does not qualify for the Saver’s Credit.

Recommended read – What is a Normal Retirement Age?


What is the Income Limit for the Tax Credit?

The amount of the Saver’s Credit you’re eligible for depends on your income level. Understanding your potential savings can help determine if this tax credit suits your financial situation. Evaluating your income and comparing it against the IRS thresholds will guide you in assessing how much you can benefit from this credit. Making it a critical step in financial planning for retirement.

For the 2023 tax year (to be filed in 2024), the IRS has set the following income guidelines to qualify for the Saver’s Credit – 


Credit Rate Married Filing Jointly Head of Household Single/Married Filing Separately
50% $43,500 or less in AGI $32,625 or less in AGI $21,750 or less in AGI
20% $43,501 – $47,500 in AGI $32,626 – $35,625 in AGI $21,751 – $23,750 in AGI
10% $47,501 – $73,000 in AGI $35,626 – $54,750 in AGI $23,751 – $36,500 in AGI
0% More than $73,000 in AGI More than $54,750 in AGI More than $36,500 in AGI



It summarizes the adjusted gross income (AGI) ranges and their corresponding credit rates for the Saver’s Credit for the 2023 tax year.

Looking ahead to the 2024 tax year (for taxes filed in 2025), the Saver’s Credit will phase out at $76,500 for married couples filing jointly. For heads of household, the phase-out limit will be $57,375, and for singles and married individuals filing separately, it will be $38,250.


How to Calculate the Value of the Saver’s Credit

To better understand how the savings contribution credit functions, consider the following example – 

Let’s take Sarah, who is filing as single with an adjusted gross income of $20,000 for the tax year 2023. She contributes $800 to her employer-sponsored 401(k) plan and $600 to her traditional IRA. Consequently, Sarah qualifies for a tax credit of $700. Her income qualifies her for a 50% credit, calculated from her total qualifying contributions of $1,400 ($800 + $600).

Now, looking at a married couple – 

Tom and Laura, who file jointly for the 2023 tax year, make retirement contributions where Tom adds $2,000 to his IRA, and Laura contributes $1,000 to her 403(b) plan. With an adjusted gross income of $40,000, they can claim a $1,500 savings credit, calculated as 50 per cent of their combined contributions of $3,000 ($2,000 + $1,000).

If Tom and Laura’s adjusted gross income were $50,000 and they made the same contributions, their savings credit would adjust to $300. This lower credit is 10 per cent of their $3,000 total contributions, reflecting the change in their income bracket.


💁‍♀️ Also read – 6 Typical Average Monthly Retirement Expenses & How to Minimize Them


Why the Savings Contribution Credit Matters

Savings Contribution Credit significantly impacts financial planning by encouraging. Retirement savings reduce tax burdens and promote financial literacy. It offers an economic incentive that helps lower and middle-income earners enhance their retirement funds, contributing to more substantial nest eggs for their future. It can lead to a tax refund or a substantially reduced tax liability.

By highlighting the importance of retirement planning, the credit educates and motivates individuals who might not otherwise prioritize their financial future. It fosters a culture of financial prudence and responsibility, which is vital in today’s economy. This trio of benefits demonstrates the critical role of the Savings Contribution Credit in fostering long-term economic security. Ensuring that more individuals can enjoy a stable and comfortable retirement.


To Sum Up

The retirement savings contribution credit is essential to financial planning, particularly for those struggling to set aside money for the future. By getting to know and utilizing this tax credit, eligible taxpayers can significantly boost their retirement savings and lower their tax liabilities. Like any tax issue, it’s wise to speak with a tax professional to ensure you fully grasp how to maximize this credit for your financial advantage.

Taking this proactive step can help ensure a more stable and fulfilling retirement.


Secure Your Retirement with Relo.AI

At, we’re dedicated to guiding you through the intricacies of retirement planning with simplicity and assurance. You can significantly enhance your financial well-being by exploring and utilizing opportunities like the Retirement Savings Contribution Credit.

Reach out directly or schedule a call with us today, and let’s start planning a secure and prosperous future together!




newsletter asset

Sign up for our daily newsletter

We bring the right people together to challenge established thinking and drive transformation. We will show the way to successive.