Tax Credit for Your Retirement Savings Contributions

A tax credit is a dollar-for-dollar reduction in the amount of federal income tax that you are required to pay. Tax credits are typically better than tax deductions because of this direct reduction. Example: Tax liability is $1,400 and you have a $500 tax credit. Your liability is reduced to $900. Depending on the situation, this could lead to a larger refund or reduction in the amount you need to send to the Treasury at tax time.

Saver’s Tax Credit: If you make contributions to an employer-sponsored retirement plan or an Individual Retirement Account (IRA) you may be eligible for the Saver’s Credit.
Saver’s Credit Eligibility Requirements:

  • Age 18 or older
  • Not a full-time student
  • Not claimed as someone’s dependent

2024 Adjusted Gross Income Limits:

  • Single Filers: $36,500
  • Married Filing Jointly: $73,000
  • Head of Household: $54,750

The amount of the credit is 50%, 20% or 10% of your retirement plan or IRA contributions. The maximum amount for the credit is $2,000 for single individuals and $4,000 for married couples filing a joint return.

The percentage applied depends on your adjusted gross income. You can find a table which shows the amount of the credit for different income levels on the IRS web site in the Saver’s Credit section.


Posted: February 21, 2024

Tags: Income Tax, Tax Credit, Tax Deductions

Subscribe For More Great Content

IFAS Blogs Categories