Dollar Bills

Saver's Tax Credit

The saver's credit can effectively boost an individual's retirement savings power

2020 Saver's Credit Income Limits

Credit Amount

Single

Head of Household

Joint Filers

50% of contribution

AGI of $19,500 or less

AGI of $29,250 or less

AGI of $39,000 or less

20% of contribution

$19,501 - $21,250

$29,251 - $31,875

$39,001 - $42,500

10% of contribution

$21,251 - $32,500

$31,876 - $48,750

$42,501 - $65,000

0% of contribution

more than $32,500

more than $48,750

more than $65,000

As the chart illustrates, the lower an individual's AGI is, the higher the saver's credit becomes.

Besides falling into one of these income tiers, you'll also need to meet the following requirements to qualify for the credit:

  1. You are age 18 or older

  2. You're not a full-time student

  3. No one claims you as a dependent on their return.

(You also need to make contributions to either a traditional IRA, Roth IRA, SIMPLE IRA, SARSEP, 401(k), 403(b), 501( c)(18), 457(b) plan or ABLE account. Rollover contributions do not qualify

 

The saver's credit can effectively boost an individual's retirement savings power. Those who qualify for this credit and don't capitalize on this opportunity are squandering a simple way to add significant value to their nest eggs.

 

Remember that tax credits are not the same as deductions; while a deduction lowers your tax bill by reducing your taxable income, a credit directly reduces your tax bill. Another thing to note is that the Saver’s credit is not refundable. So if the credit pushes your tax liability (how much you owe in taxes for the year) below zero, you will not get a refund for the difference. You will simply have no tax liability.

The Saver’s Credit is a great way for low- and moderate-income individuals or couples to save for retirement while also saving money on their taxes.

 

Claiming a saver's credit when contributing to a retirement plan can reduce an individual's income tax burden in two ways. 

  • First, the contribution to the plan itself qualifies as a tax deduction.

 

  • Second, the saver's credit reduces the actual taxes owed, dollar for dollar.

 

This credit provides a tax deduction for some of your IRA or ABLE account contributions, as long your income falls below a certain threshold.

 

 

The saver's tax credit is a non-refundable tax credit available to eligible taxpayers who make salary-deferral contributions to employer-sponsored 401k, 403b, SIMPLE, SEP, governmental 457 plans, or ABLE accounts. It is likewise available to those who contribute to traditional and/or Roth IRAs.

 

 

Depending on income levels (see chart), the credit is worth either 10%, 20%, or 50% of a person's eligible contribution, but there are caps in place. As your income increases, the credit for which you qualify is smaller, providing a credit of either 20% or 10% of your contributions.

 

The credit is worth a maximum of $1,000 ($2,000 if you file jointly).

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Investment advice is offered through Belpointe Asset Management, LLC. Insurance and annuity products may be offered through D.H. Hill Securities, LLLP. Securities are offered through D.H. Hill Securities, LLLP, Member FINRA/SIPC. D.H. Hill Securities, LLLP, Todd Mann Financial Services Inc., and Belpointe Asset Management, LLC are not affiliated entities. Todd Mann Financial Services Inc. is currently insurance licensed in the states of Oregon, New Jersey, and Wisconsin.

Insurance and annuity products may be offered through D.H. Hill Securities, LLLP. 

 

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