Saver's Tax Credit


DEFINITION of 'Saver's Tax Credit'

A non-refundable tax credit available to lower income individuals and households that contribute to qualified retirement savings plans. This includes employer-sponsored plans such as 401(k), SIMPLE and SEP plans, or the governmental 457 plan, along with contributions to Traditional and Roth IRAs. The amount of the credit will depend on the adjusted gross income of the individual or household and the size of the contribution.


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BREAKING DOWN 'Saver's Tax Credit'

A taxpayer must be at least 18 years old to be eligible for the credit. Individuals that are full-time students, were full-time students for at least five months of the year, or filed as dependents are not eligible.

The maximum contribution amount to which this credit can be applied is $2,000. For households with an adjusted gross income of $30,000 and under ($22,500 for individuals) the credit rate is 50%. Households with an adjusted gross income of between $30,001 and $32,500 ($22,501 – $24,375 for individuals) the credit rate is 20%. For households earning an adjusted gross income of $32,501 to $50,000 ($24,376 – $37,500 for individuals) the credit rate is 10%. For example, an individual earning $22,900 who contributes $2,000 to a retirement plan will receive a tax credit of $400 ($2,000 x 20%).

Any amount above the 10% credit rate limits are not eligible for this tax credit.

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  1. How do I sign up for the saver's tax credit?

    The saver's tax credit is a non-refundable tax credit available to eligible taxpayers in the U.S. who make contributions ... Read Full Answer >>
  2. Can you have both a 401(k) and an IRA?

    Investors can have both a 401(k) and an individual retirement account (IRA) at the same time, and it is quite common to have ... Read Full Answer >>
  3. Are 401(k) contributions tax deductible?

    All contributions to qualified retirement plans such as 401(k)s reduce taxable income, which lowers the total taxes owed. ... Read Full Answer >>
  4. Are 401(k) rollovers taxable?

    401(k) rollovers are generally not taxable as long as the money goes into another qualifying plan, an individual retirement ... Read Full Answer >>
  5. Are catch-up contributions included in the 415 limit?

    Unlike regular employee deferrals, catch-up contributions are not included in the 415 limit. While there is an annual limit ... Read Full Answer >>
  6. Can catch-up contributions be matched?

    Depending on the terms of your plan, catch-up contributions you make to 401(k)s or other qualified retirement savings plans ... Read Full Answer >>

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