The Saver’s Credit

Tax Incentive for Lower Income Workers

Congress established years ago a little-known tax credit to encourage lower income workers to save for retirement. This tax incentive provides a tax credit to qualifying individuals to reduce their federal tax liability when they contribute to a retirement account, such as an IRA or their company’s 401(k) plan or 403(b) plan. Eligible taxpayers can earn a Saver’s Credit — up to $1,000 for individuals and $2,000 for married couples filing jointly—on qualifying contributions to an IRA or an employer-sponsored retirement savings plan.


The Saver’s Credit (formally named the “Retirement Savings Contributions Credit”) allows qualifying individuals to save on their taxes while saving for their retirement. Contributing a portion of your earnings into a retirement plan pre-tax ultimately reduces the amount of your income that is subject to federal taxation. Generally, the amounts in your IRA or 401(k)/403(b) plan grow tax deferred until you receive a distribution. When you qualify for the Saver’s Credit, you have the opportunity to reduce your taxes even further.

Who Qualifies for the Saver’s Credit

Taxpayers are eligible for the Saver’s Credit if they meet the following criteria:

  • The individual is 18 years or older
  • The individual is not a full-time student
  • The individual is not claimed as a dependent on another person’s tax returns

Eligible Contributions for this Credit

The Saver’s Credit can be claimed for your contributions to the following retirement accounts: a traditional IRA; a Roth IRA; your 401(k) plan; a SIMPLE IRA; a SARSEP; a 403(b) plan; a 501(c)(18) plan; a governmental 457(b) plan; and your voluntary after-tax employee contributions to your qualified retirement plans and 403(b) plans. Please note that rollover contributions from another retirement plan are not eligible for this credit. Finally, beginning in 2018, if you are the designated beneficiary you may be eligible for this credit for contributions to your ABLE (“Achieving a Better Life Experience”) account.

This might sound appealing to you, but as if often the case with tax incentives, there are limitations with the credit. The Saver’s Credit is determined by taking the amount your retirement contribution (as described above) and multiplying it by 50%, 20%, or 10% depending upon your “Adjusted Gross Income” (“AGI”) on your tax return and your filing status.

Using the chart below, you can determine the amount of your Saver’s Credit in 2019. Begin by taking your AGI (total income minus qualified deductions but does not include any itemized deductions nor the standard deduction) and refer to this chart to see if you qualify and how much credit you can claim.

Filing Status/Adjusted Gross Income for 2019

Amount of CreditJointHead of HouseholdSingle/Others
50% of contribution$0 to $38,500$0 to $28,875$0 to $19,250
20% of contribution$38,501 to $41,500$28,876 to $31,125$19,251 to $20,750
10% of contribution$45,501 to $64,000$31,126 to $48,000$20,751 to $32,000

Other Resources

Here are several other IRS resources you may find helpful as you look at this credit:

Please contact us to learn more about contributing to your retirement plan and perhaps claiming the Saver’s Credit.

Distributions before the age of 59 ½ may be subject to an additional 10% early withdrawal penalty. This is for informational purposes only; we suggest that you speak with a tax professional about your individual situation. Source: IRS Form 8880.

Sikich Financial does not provide legal, tax, or accounting advice. Before making decisions with legal, tax, or accounting ramifications, you should consult appropriate professionals for advice that is specific to your situation.


This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

About the Author