Saver's Tax Credit

Loading the player...

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.

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.

RELATED TERMS
  1. Energy Tax Credit

    An energy tax credit is given to homeowners who make their homes ...
  2. Credit For Qualified Retirement ...

    Also known as IRS Form 8880, the Credit for Qualified Retirement ...
  3. 457 Plan

    A non-qualified, deferred compensation plan established by state ...
  4. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  5. Traditional IRA

    An individual retirement account (IRA) that allows individuals ...
  6. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
Related Articles
  1. Retirement

    IRA Contribution Limits in 2016

    Find out about the 2016 limits for contributions and income thresholds for individual retirement accounts, including traditional IRAs and Roth IRAs.
  2. Savings

    Saver's Tax Credit: A Retirement Savings Incentive

    Here's another reason to put money toward your retirement nest egg.
  3. Taxes

    IRA Contributions: Deductions and Tax Credits

    We outline the incentives and help you take full advantage of the benefits.
  4. Retirement

    5 Retirement-Wrecking Moves

    These common mistakes can sabotage your nest egg and your plans for retiring.
  5. Taxes

    Tax Deductions Vs. Tax Credits

    Understanding the difference between tax deductions and credits is crucial, as the tax strategies that you adopt now can favor one over the other and yield substantially different tax savings.
  6. Taxes

    How To Save More For Your Retirement

    The Economic Growth and Tax Relief Reconciliation Act of 2001 made it easier to prepare for the future. Will you be ready?
  7. Taxes

    Give Your Taxes Some Credit

    A few tax credits can greatly increase the amount of money you get back on your return.
  8. Retirement

    The Pension Bill: A Wolf In Sheep's Clothing

    Find out why the 2006 act may not be all it's cracked up to be.
  9. Retirement

    Are You Saving Too Much?

    "Spend now! Don't worry about retirement," say some experts. Could they possibly be right?
  10. Retirement

    How Much Should You Have In Your 401(k) To Retire?

    Determining how much money should be in your 401(k) when you retire depends on several variables, many of which are uncertain.
RELATED FAQS
  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. Am I losing the right to collect spousal Social Security benefits before I collect ...

    The short answer is yes, if you haven't reached age 62 by December 31, 2015. The Bipartisan Budget Act of 2015 disrupted ... Read Full Answer >>
  3. When should my tax refund arrive?

    More than 90% of income-tax refunds arrive in less than three weeks, according to the Internal Revenue Service (IRS). However, ... Read Full Answer >>
  4. How do I file taxes for income from foreign sources?

    If you are a U.S. citizen or resident alien, your income (except for amounts exempt under federal law), including that which ... Read Full Answer >>
  5. Are Flexible Spending Account (FSA) items tax deductible?

    Flexible Spending Accounts (FSAs) are employer-sponsored, tax-favored savings plans expressly for the future reimbursement ... Read Full Answer >>
  6. How Long Should I Keep My Tax Records?

    The Internal Revenue Service (IRS) has some hard and fast rules regarding how long taxpayers should keep their tax records. As ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center