The Retirement Savings Contribution Credit (also known as the (Saver’s Credit) is a federal non-refundable tax credit available to workers who make eligible contributions to a qualified IRA, 401 (K), contributions made to an ABLE account or certain other retirement plans.
The credit is a percentage of the qualifying contributions, with the highest rate for taxpayers with the least amount of income.
To claim the credit, taxpayers must complete form 8880, Credit for Qualified Retirement Savings Contributions, and attach the form to his/her Form 1040, or Form 1040A. The federal tax credit is not refundable; that is, claimants cannot receive a refund for any part of the credit that is more than their tax liability.
Retirement Savings Contribution Credit
DESCRIPTION OF THE RETIREMENT SAVINGS CONTRIBUTIONS CREDIT
The Retirement Savings Contributions Credit, also known as the Saver’s Tax Credit, helps low- and moderate-income families save for their retirement and earn a non-refundable tax credit. The credit is applied against an individual’s personal income tax liability, which can reduce or eliminate any taxes owed to the IRS.
An individual’s filing status, adjusted gross income, and eligible contributions determine the amount of credit.
The amount of the credit a filer receives can be as high as $1,000 for singles and $2,000 for married couples filing jointly. The amount is based on the contributions made and the individual’s credit rate. The tax credit rate, which can be as low as 10% or as high as 50%, depends on an individual’s income and their filing status. Individuals who wish to determine his/her credit rate can refer to IRS form 8880, Credit for Qualified Retirement Savings Contributions.
For additional information go to https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit.
QUALIFYING FOR THE RETIREMENT SAVINGS CONTRIBUTION CREDIT
Eligible contributions are those made to a traditional or Roth IRA and/or salary reduction contributions to most employer-sponsored retirement plans. Taxpayers can put their money into any of the types of retirement contributions listed below:
- A traditional or Roth IRA
- A 401k plan or 403b annuity
- A governmental 457 plan
- A simple IRA plan or a salary reduction Simplified Employee Pension Plan
- A 501©(18) plan
- Voluntary after-tax contributions to a tax qualified retirement plan or section 403(b) annuity
In addition, a taxpayer who is the beneficiary may also be entitled to receive this credit for contributions to Achieving a Better Life Experience (ABLE) savings accounts.
Taxpayers must be 18 years old or older.
Taxpayer cannot be a full-time student during the calendar year. An individual is considered a full-time student if s/he is a full-time student for 5 months of the calendar year.
The filer claiming the credit must be U.S. citizens or immigrants who are legally residing residents. They must have either a Social Security Number or an Individual Taxpayer Identification Number (ITIN) to file a tax return.
The filer cannot be claimed as a dependent on someone else’s federal income tax return.
There are no assets/resource requirements.
Someone in the filing household must have worked and have earnings at some time during the year. Earned income includes wages, salaries, tips, net earnings from self-employment, investment income, dividends, tax-exempt interest, and net income from rents and royalties.
The income limits vary by filing status. In addition, filers with lower incomes will receive a higher credit rate. Filers are not eligible if his/her adjusted gross income exceeds the income guidelines listed below.
Adjusted Gross Income Guidelines for tax year 2022:
- Married filing jointly: $68,000
- Head of household: $51,000
- All other filers: $34,000
CLAIMING THE RETIREMENT SAVINGS CONTRIBUTION CREDIT
To claim the Retirement Savings Contribution Credit, a filer must complete IRS Form 8880, https://www.irs.gov/pub/irs-pdf/f8880.pdf, and attach the form to his/her IRS Form 1040 or Form 1040A.
Filing Tax Returns
Individuals filing for the credit should have the following documentation with them if they obtain assistance filling out their tax returns:
- Proof of identity, such as a driver’s license or other photo ID
- Social Security number or ITIN letter for all individuals listed on the return, including dependents
- Copies of all W-2’s, 1098 and 1099 forms
- Amounts/dates of estimated or other tax payments made
- Bank documents showing routing and account numbers, if requesting direct deposit into a checking or savings account.
See below, Additional Resources, for free tax preparation information.
Individuals should file after January 1st of the current filing year, but no later than April 15th of the current filing year. Individuals who cannot meet the filing date can request a 6 months extension of time.
Where to file
Individuals who are paper filing his/her return and do not owe any taxes, should mail his/her form to:
Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999-0002
Individuals who are paper filling, who owe taxes and are enclosing payments, should mail his/her form to:
Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999-0102