If you’re 18 or older, and not a full-time student or a dependent on another person’s tax return, you can unlock the power of the Saver’s Credit. It’s an incentive designed to help individuals boost their retirement savings.
Tap into the Saver’s Credit
Savvy taxpayers are on the lookout for as many credits as they can get their hands on. The Retirement Savings Contributions Credit — a dollar-for-dollar reduction on the income taxes you owe now — is a great way to earn a benefit today while you plan to live your best life later. The Saver’s Credit, however, is a nonrefundable credit, which means the credit won’t reduce your total tax bill below zero.
Eligible individuals who make retirement contributions may qualify for one of three credit rates: 50%, 20%, or 10%. The rate you qualify for depends on your income earned, filing status, and the qualifying contributions made. To claim this credit, your income must not exceed certain thresholds. Your adjusted gross income (AGI) is the magic number that will determine if you qualify for the Saver’s Credit.
A single person can claim a maximum credit of up to $1,000. If you’re single with AGI less than $19,750, you qualify for a credit worth 50% of your contribution. Let’s say you contribute $1,500 to a qualified retirement savings plan. Your 50% credit will translate into a $750 reduction in the taxes you owe. If you’re married, you’ll get a boost in benefits, allowing you to claim a maximum credit of up to $2,000.