IRS Form 8880 is used to figure out the amount of Saver’s Credit for which an individual is eligible, and includes a built in formula that helps the taxpayer determine the amount.
The Saver’s Credit can be claimed in addition to deduction received for traditional IRA contribution.
IRS Form 8880 :Credit for Qualified Retirement Savings Contributions
Additional Helpful Information
Employers are encouraged to tell their employees about the credit. Employers can inform employees in any way they choose, including use of the notice set out below.
Notice to Employees Regarding Saver’s Credit:
This notice explains how you may be able to pay less tax by contributing to [insert name of employer’s plan] (the “Plan”) or to an individual retirement arrangement (“IRA”).
Beginning in 2002, if you make contributions to the Plan or to an IRA, you may be eligible for a tax credit, called the “saver’s credit.” This credit could reduce the federal income tax you pay dollar for- dollar. The amount of the credit you can get is based on the contributions you make and your credit rate. The credit rate can be as low as 10% or as high as 50%, depending on your adjusted gross income — the lower your income, the higher the credit rate. The credit rate also depends on your filing status. See the tables at the end of this notice to determine your credit rate.
The maximum contribution taken into account for the credit for an individual is $2,000. If you are married filing jointly, the maximum contribution taken into account for the credit is $2,000 each for you and your spouse.
The credit is available to you if you:
are 18 or older,
are not a full-time student,
are not claimed as a dependent on someone else’s return, and
have adjusted gross income (shown on your tax return for the year of the credit) that does not exceed: