The Saver’s Credit, officially known as the Retirement Savings Contributions Credit, is a tax credit designed to encourage low- to moderate-income individuals to save for retirement. It provides a financial incentive to contribute to retirement accounts such as:

  • 401(k), 403(b), 457(b) plans

  • Traditional or Roth IRAs

  • SIMPLE or SEP IRAs

  • ABLE accounts (for people with disabilities)

How the Saver’s Credit Works

It’s a non-refundable tax credit, meaning it can reduce your tax bill to zero, but it won’t result in a refund if the credit exceeds your tax liability. You can claim 10%, 20%, or 50% of your contributions, depending on your income and filing status. The maximum credit is $1,000 for individuals or $2,000 for married couples filing jointly.

Who Qualifies? To be eligible, you must:

  • Be 18 or older

  • Not be a full-time student

  • Not be claimed as a dependent on someone else’s tax return

  • Meet income limits (for tax year 2024, these are):

    • $76,500 for married filing jointly

    • $57,375 for head of household

    • $38,250 for single or married filing separately

Who Should Pay Attention

  • Low to Moderate Income Earners

    • If your income falls within the eligible range, this credit is designed for you.

    • Examples: retail workers, service industry employees, gig workers, early-career professionals.

  • Young Adults Starting Out

    • New to the workforce and earning modest income? Even small contributions to a retirement account can qualify and lead to big long-term benefits.

  • Part-Time Workers or Second-Income Spouses

    • If you or your spouse work part-time or one of you earns significantly less, the lower income might qualify you for the credit as a couple.

  • Self-Employed Individuals

    • If you contribute to a SEP IRA or Solo 401(k) and your income is within limits, you can claim the Saver’s Credit too.

  • Older Adults Returning to Work or Working Low-Income Jobs

    • Those who are nearing retirement but are working in lower-income positions can use this as a final boost to their savings.

  • People Claiming the Standard Deduction

    • Since this is a credit, not a deduction, it benefits both those who itemize and those who don’t.

How It Helps With Retirement

  1. Incentivizes Saving: Offers a direct reward for putting money into retirement accounts.

  2. Boosts Long-Term Growth: Helps people get started saving early, which can result in more compounded growth over time.

  3. Reduces Tax Liability: Makes saving feel more “affordable” by lowering the tax bill in the year contributions are made.

Example

Let’s say you’re single, earn $30,000, and contribute $2,000 to a traditional IRA. You could be eligible for a 50% credit, which would give you a $1,000 tax credit—on top of any deduction you get for contributing to the IRA.

When to Pay Attention

During Tax Season:
When preparing your return, especially with tax software or a preparer, double-check if you qualify—it’s often overlooked!

Before Year-End (December 31st):
That’s your deadline to contribute to employer-sponsored plans (like a 401(k)) to qualify for the Saver’s Credit for that tax year.

Before Tax Filing Deadline (Usually April 15th):
For IRA contributions, you can make a contribution for the previous tax year up until the tax filing deadline—still qualifying for the Saver’s Credit.

At the Akopyan Group we take a proactive, “no surprises” approach that will help you fully capitalize on tax benefits. We’ll assist with planning and forecasting, so we can anticipate changes and take the appropriate measures to protect and enhance your financial situation. And we’ll stay in touch on a consistent basis, because we want to help both you and your company succeed.

If you’re ready to work with a professional who can help you put all the pieces together, contact us today at info@ygacpa.com or 206-838-3800.

Posted in

Leave a Comment