According to the Transamerica Center for Retirement Studies, only 12 percent of working Americans eligible for a retirement savings contributions tax credit are aware that this credit exists.
Like other tax credits, the "Saver's Credit," can increase a taxpayer's refund or reduce the tax owed. The credit helps offset part of the first $2,000 workers voluntarily contribute to individual retirement arrangements, 401(k) plans and similar workplace retirement programs. Credits of up to $1,000 for single-filers, and $2,000 for married couples, are available.
The credit is available to workers aged 18 years or older who have contributed to a company-sponsored retirement plan or IRA in the past year and meet the Adjusted Gross Income requirements.
Recommended For You
Single filers with an adjusted income of up to $27,750 in 2010 or $28,250 in 2011 are eligible.
For the head of a household, the adjusted income limit is $41,625 in 2010 and $42,375 in 2011.
For those who are married and file a joint return, the adjusted income limit is $55,500 in 2010 or $56,500 in 2011. Additionally, the filer cannot be a full-time student or be claimed as a dependent on another person's tax return.
Workers can take the following steps to claim the credit:
If you are using tax preparation software to prepare your tax return, use Form 1040A, Form 1040 or Form 1040NR. The credit is not available with Form 1040EZ; however the IRS has included instructions with the EZ form directing you to a different form if you choose to claim the credit. If your software has an interview process, be sure to answer questions about the Saver's Credit, Retirement Savings Contributions Credit and/or Credit for Qualified Retirement Savings Contributions.
If you are preparing your tax returns manually, complete Form 8880, the Credit for Qualified Retirement Savings Contributions, to determine the exact credit rate and amount. Then transfer the amount to the designated line on Form 1040A, Form 1040 or 1040NR.
If you are using a professional tax preparer, be sure to ask about the Saver's Credit.
"The Saver's Credit is a meaningful incentive for low-to-middle income individuals and households to save for retirement. Unfortunately, few are aware that it's available," said Catherine Collinson, president of the Transamerica Center for Retirement Studies. "It's important that we work to raise awareness of this wonderful tax credit and opportunity to save for retirement so that more workers may take advantage of it and improve their chances of financial security down the road."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
