Definition
Also known as the Saver’s Tax Credit: Nonrefundable tax credit available to eligible individuals who make contributions to their retirement account. The saver’s credit is capped at $1,000, and the percentage for which the individual is eligible depends on his/her AGI.
The types of contributions are eligible for the saver’s credit are :
- Salary reduction contributions to 401(k) plan (including a SIMPLE 401(k)), a section 403(b) annuity, an eligible deferred compensation plan of a state or local government (a “governmental 457 plan”), a SIMPLE IRA plan, or a salary reduction SEP.
- Voluntary after-tax employee contributions to a tax-qualified retirement plan or section 403(b) annuity. For purposes of the credit, an employee contribution will be “voluntary” as long as it is not required as a condition of employment.
- Contributions to a traditional IRA or Roth IRA.
The following table provides the percentage of tax credit available for individuals within the indicated AGI ranges.
2022 Thresholds (c) www.deniseappleby.com |
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Credit Rate |
Married and files a joint return |
Files as head of household |
Other category of filers |
|||
Over |
Not Over |
Over |
Not Over |
Over |
Not Over |
|
50% |
$0.00 |
$41,000 |
$0.00 |
$30,750 |
$0.00 |
$20,500 |
20% |
$41,000 |
$44,000 |
$30,750 |
$33,000 |
$20,500 |
$22,000 |
10% |
$44,000 |
$68,000 |
$33,000 |
$51,000 |
$22,000 |
$34,000 |
0% |
$68,000 |
$51,000 |
$34,000 |
2021 Thresholds (c) www.deniseappleby.com |
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Credit Rate |
Married and files a joint return |
Files as head of household |
Other category of filers |
|||
Over |
Not Over |
Over |
Not Over |
Over |
Not Over |
|
50% |
$0.00 |
$39,500 |
$0.00 |
$29,625 |
$0.00 |
$19,750 |
20% |
$39,500 |
$43,000 |
$29,625 |
$32,250 |
$19,750 |
$21,500 |
10% |
$43,000 |
$66,000 |
$32,250 |
$49,500 |
$21,500 |
$33,000 |
0% |
$66,000 |
$49,500 |
$33,000 |
The credit can be claimed for IRA contributions and salary deferral contributions to employer sponsored plans
Referring Cite
IRC §25B(b), IRC§25A ,Announcement 2001-106, IRS Form 8880
Additional Helpful Information
- Other requirements for receiving the credit apply. These include the following:
- The individual must be at least 18 years of age the year for which the credit is claimed
- The individual cannot be claimed as a dependent on someone else’s tax return
- The individual cannot be a fulltime student
- An amount contributed to an individual’s IRA is not a contribution eligible for the saver’s credit if
-
- the amount is distributed to the individual before the due date (including extensions) of the
individual’s tax return for the year for which the contribution was made, - no deduction is taken with respect to the contribution, and
- the distribution includes any income attributable to the contribution.
- the amount is distributed to the individual before the due date (including extensions) of the
-
- Eligible individuals entitled to deduct IRA contributions or to exclude plan contributions
from gross income will be able to deduct or exclude those amounts and also claim the saver’s
credit. - A taxpayer can use the saver’s credit to offset both an alternative minimum tax liability and a
regular income tax liability