Saver’s Credit: How To Get Free Money To Save for Retirement

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If you think you have to earn a lot of money to be able to save for the future, you’re in for a neat surprise. There’s a little-known federal tax credit that gives low-to-moderate income earners up to $2,000 as a reward for saving money.

How the Saver’s Credit Can Help You Save for the Future

In 2001, Congress passed the Retirement Savings Contributions Credit (Saver’s Credit). The measure is designed to help savers who make a decent living but not a huge income.

If you stash cash in your workplace retirement account, IRA or Achieving a Better Life Experience (ABLE) plan, the government will match your money with a 10%, 20% or 50% tax credit, depending on your adjusted gross income (AGI). The maximum credit is $1,000 ($2,000 if married and filing jointly).

You may be eligible for the credit if you fit all of these criteria:

  • Age 18 or older
  • Not claimed as a dependent on another person’s return
  • Not a student

See more details about eligibility here.

Saver’s Credit Example

The Internal Revenue Service (IRS) website provides a real-world example of how this credit works:

“Jill, who works at a retail store, is married and earned $41,000 in 2020. Jill’s spouse was unemployed in 2020 and didn’t have any earnings. Jill contributed $2,000 to her IRA for 2020. After deducting her IRA contribution, the adjusted gross income shown on her joint return is $39,000. Jill may claim a 50% credit of $1,000 for her $2,000 IRA contribution on her 2020 tax return.”

Saver’s Credit Income Limits for 2021

Use this chart from the IRS to calculate your credit:

Credit RateMarried Filing JointlyHead of HouseholdAll Other Filers
50% of your contributionAGI not more than $39,500AGI not more than $29,625AGI not more than $19,750
20% of your contribution$39,501 - $43,000$29,626 - $32,250$19,751 - $21,500
10% of your contribution$43,001 - $66,000$32,251 - $49,500$21,501 - $33,000
0% of your contributionmore than $66,000more than $49,500more than $33,000

This is important: The Saver’s Credit is the kind of tax credit that you have to ask for when you’re doing your taxes; you won’t automatically get this benefit.

The form you need to file to claim the credit is 8880.


Final Thought

It appears that few people are aware of this Saver’s Credit. The Transamerica Center for Retirement Studies has research suggesting that only 12% of U.S. workers with annual household incomes of less than $50,000 even know about this credit.

That’s got to change.

Our goal here at is for you to save money. If there’s an opportunity, we want you to take the dough!

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