As Americans start to focus on filing their 2024 taxes, a new survey has found only about half of U.S. workers (51%) are aware of a currently available tax credit that may help them save for retirement while lowering their tax bill.
“Many low- to moderate-income retirement savers may be missing out on the Saver’s Credit simply because they don’t know about it.”
Catherine Collinson
The Saver’s Credit, also referred to as the Retirement Savings Contributions Credit by the Internal Revenue Service (IRS), is available to millions of taxpayers who are saving for retirement that may reduce a person’s federal tax bill, notes a Feb. 12 press release from nonprofit Transamerica Center for Retirement Studies (TCRS).
The 25th Annual Transamerica Retirement Survey, conducted last fall by The Harris Poll on behalf of Transamerica Institute and TCRS, found 51% of U.S. workers are aware of the Saver’s Credit.
“Many low- to moderate-income retirement savers may be missing out on the Saver’s Credit simply because they don’t know about it,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS. “It complements the other tax-advantages of saving for retirement in a 401(k), 403(b), or IRA.”
According to TCRS’ analysis of the most recently published IRS data, the average amount of the Saver’s Credit in 2022 was $194.
The Saver’s Credit is a non-refundable tax credit that may be applied up to the first $2,000 of voluntary contributions an eligible taxpayer makes to a 401(k), 403(b), or similar employer-sponsored defined contribution retirement plan, a traditional or Roth IRA, or an ABLE (Achieving a Better Life Experience) account. In this context, “non-refundable” means the credit cannot exceed a person’s federal income tax for the year. The maximum credit is $1,000 for single filers or individuals and $2,000 for married couples filing jointly.
It is important to note that beginning in 2027, the recently enacted SECURE Act 2.0 of 2022 replaces the Saver’s Credit with the Saver’s Match, a matching contribution from the federal government for retirement savers meeting income and other eligibility requirements. The Saver’s Match will be 50% of a worker’s retirement plan or IRA contributions up to $2,000, representing a maximum match of $1,000.
Saver’s Credit eligibility
The credit is available to individuals ages 18 years or older who have contributed to a 401(k), 403(b) or similar employer-sponsored retirement plan, a traditional or Roth IRA, or an ABLE account in the past year and meet the Adjusted Gross Income (AGI) requirements:
• Single tax filers: maximum AGI of $38,250 in 2024 and $39,500 in 2025;
• Heads of households: maximum AGI of $57,375 in 2024 and $59,250 in 2025; and,
• Married filing jointly: a maximum AGI of $76,500 in 2024 and $79,000 in 2025.
Additionally, the tax filer cannot be a full-time student and cannot be claimed as a dependent on another person’s tax return. For more details about eligibility, refer to TCRS’ fact sheet.
Tips for claiming
Participants who think they may be eligible should consider using the IRS’ online tool to help determine if they qualify for the credit.
Persons using an online tax preparation tool to prepare their tax return, including those offered through the IRS Free File program, need to answer questions about the Saver’s Credit, also referred to by the IRS as the “Retirement Savings Contributions Credit,” and “Credit for Qualified Retirement Savings Contributions.”
TCRS warns participants to comparison shop among vendors included in the IRS Free File program and commercially available tax preparation software, as many charge a fee for claiming the Saver’s Credit.
For those who prepare their tax return manually, complete Form 8880, Credit for Qualified Retirement Savings Contributions, to determine their exact credit rate and amount. Then, transfer the amount to line 4 on Schedule 3, which is used with Forms 1040, 1040-SR, and 1040-NR.
For those who use a professional tax preparer, be sure to inquire about the Saver’s Credit.
“The Saver’s Credit is a well-kept secret. Please spread the word about it by telling family, friends, and colleagues. It could help eligible savers improve their long-term savings and inspire non-savers to start saving for retirement,” said Collinson. “Saving habitually over time is essential for achieving long-term financial security. Every dollar counts.”
TCRS also noted for those who did not save for retirement in 2024, it’s not too late. You have until April 15, 2025 to make an IRA contribution for the 2024 tax year.
SEE ALSO:
• Saver’s Match Could Solve the Retirement Savings Gap: Morningstar
• 2025 No Time for a Retirement Tax Hike: ICI CEO
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
