Retirement insights from a Colorado PERA perspective

Issues & Perspectives

The tax credit you might not know you have

Saver's credit

As America Saves Week approaches
at the end of February (February 25 – March 2), there is an opportunity to
promote a valuable way for low- and middle-income Americans to save for

The campaign is the brainchild of the Consumer Federation of
, a nonprofit collective of consumer education organizations
that aims to help people learn more about money, debt and savings, and to
organize their finances. The America Saves website offers numerous
of people and communities that have benefited from this

Among the array of savings methods that might appeal to PERA members is the Saver’s Credit. Formerly known as the Retirement Savings Contributions Credit, the Saver’s Credit provides a nonrefundable tax credit worth up to $2,000 ($4,000 for joint filers) to eligible low- and middle-income taxpayers who make contributions to retirement savings accounts such as an IRA or 401(k).

The credit reduces an eligible worker’s tax bill
dollar for dollar, helping to offset the cost of funding a retirement account. Saver’s
Credit recipients don’t need to be nearingretirementbut must be 18 or
older and cannot be full-time students or claimed as a dependent on someone
else’s tax return.

(If this is the first you’re hearing of this, don’t
feel bad: According to TurboTax, only 12 percent of American households with
annual incomes under $50,000 realize it’s available to them.)

, the maximum adjusted gross income to be
eligible for the credit is $32,000 per year for single filers, $48,000 for
heads of household, and $64,000 for joint filers. Retirement contributions earn
a credit of between 10 and 50 percent of the savings amount, depending on level
of income, up to the $1,000 maximum. And it’s not a one-time offering. As long
as your income meets the requirements, you’re eligible, though the credit
decreases as income rises.

The Saver’s Credit was
recently cited
by retirement experts as being a critical part of
helping solve America’s growing retirement crisis, along with promoting
automatic retirement savings plans. “By combining [such] automatic retirement
savings with a transformation of the Saver’s Credit, Congress can boldly lead
America and produce measurable progress for a majority of America’s workers,” said
Diane Oakley, executive director of the National Institute on Retirement Security,
during her testimony in a February House Ways and Means Committee hearing on
the issue. “Acting sooner rather than later will greatly improve our future
retirement security.”

Eligible Saver’s Credit participants can claim the credit by using Form 8880, “Credit for Qualified Retirement Savings Contributions.” Visit the IRS website to download the form and review the program’s specific requirements and procedures.


  1. Susan Conwell says:

    That whole credit is stupid… the ceiling on AGI is set such that people who MIGHT otherwise be able to take it generally can’t because they make too much money… and those below haven’t got enough money leftover to do so. Bet you’ll find that the credit doesn’t get used much.

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