Chapter Listing

Tax Credit Programs

Other Tax Credits

Summary

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 to the 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 their 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

Qualifying Contributions

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.

Age

Taxpayers must be 18 years old or older.

School Requirements

Taxpayer cannot be a full-time student during the calendar year. An individual is considered a full-time student if they are a student for 5 months of the calendar year.

Citizenship/Immigration Requirements

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.

Dependency Requirements

The filer cannot be claimed as a dependent on someone else’s federal income tax return.

Assets/Resources

There are no assets/resource requirements.

Income

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 their adjusted gross income exceeds the income guidelines listed below.

Adjusted Gross Income Guidelines for tax year 2023:

  • Married filing jointly: $73,000

  • Head of household: $54,750

  • All other filers: $36,500

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 to the 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.

Filing Date

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 their return and do not owe any taxes, should mail their 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 their form to:

Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999-0102

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