Retirement Savings Tax Credit: What You Need to Know

Retirement Savings Tax Credit: What You Need to Know

by LandrumHR, on January 17, 2023
Employees who participate in a qualified retirement plan may be eligible, depending on 2022 annual income, to claim a tax credit for retirement plan contributions made during 2022. The Saver’s Tax Credit is a special tax break to help moderate income taxpayers save for retirement. The Saver’s Tax Credit may allow participants to reduce annual income tax obligation dollar-for-dollar by up to $1,000 for single taxpayers and up to $2,000 for married taxpayers filing joint returns. Effectively, this is free money provided by the government to encourage employees to save.

Participants eligible for the Saver’s Tax Credit simply need to complete IRS Form 8880 when filing their annual tax return.

The Saver’s Tax Credit is in addition to the tax benefits participants already receive by contributing to a retirement plan.

The amount of the Saver’s Tax Credit is calculated based on how much the participant contributes to the retirement plan each year, with the tax credit percentage (50%, 20%, or 10%) determined by adjusted gross income (reported on your Form 1040 tax return) and filing status. The maximum plan contribution that may be used to calculate the amount of the Saver’s Tax Credit is $2,000 per individual or $4,000 if filing a joint return. See the table below:
2022 Saver's Tax Credit (AGI is Adjusted Gross Income)
Credit Rate Married Filing Jointly Head of Household All Other Filers*
50% of Your Contribution** AGI not more than $41,000 AGI not more than $30,750 AGI not more than $20,500
20% of Your Contribution $41,001 - $44,000 $30,751 - $33,000 $20,501 - $22,000
10% of Your Contribution $44,001 - $68,000 $33,001 - $51,000 $22,001 - $34,000
0% of Your Contribution More than $68,000 More than $51,000 More than $34,000

*Single, married filing separately or qualifying widow(er). 
**Maximum contribution considered for the Saver’s Tax Credit is $2,000 per individual; $4,000 if filing a joint return.


To Qualify for the Saver’s Tax Credit:

  1. A participant must be at least 18 years of age and not claimed as a dependent on another person’s (parents, for example) tax return.
  2. Cannot be a full-time student.
  3. For 2022, adjusted gross income must not have been over $34,000 if single, $51,000 if filing as a head of household, or $68,000 if married filing jointly.

Saver’s Tax Credit Example:

Jill is married and earned $41,000 in 2022. Jill’s husband was unemployed in 2022 and did not have any earnings. Jill and her husband file a joint tax return. Jill contributed $2,000 to her retirement plan in 2022. The adjusted gross income shown on Jill’s joint return is $39,000. Jill may claim a 50% tax credit, or $1,000 for her $2,000 retirement plan contribution.

Rollover contributions (money that a participant moved from another retirement plan or IRA) are not eligible for the Saver’s Tax Credit. The amount of the Saver’s Tax Credit available to a participant may be reduced by any recent distributions the participant (and the participant’s spouse if filing jointly) received from a retirement plan or IRA.

We can’t give you tax advice. You should check with a tax professional for answers to specific questions.

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