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Home » Taxes

Will you Qualify for the Saver’s Tax Credit in 2011 or 2012?

Last updated by on 14 Comments

What is the Saver’s Credit?

The Saver’s Credit (officially dubbed the ‘retirement savings contribution credit‘) is a lesser known, highly advantageous tax credit that the IRS makes available to low and moderate income taxpayers who make retirement contributions to an IRA, 401K, or any other government recognized retirement account.

It’s worth taking a serious look at as it is an actual tax credit, not merely a deduction. If  you’re not sure of the distinction – a deduction simply subtracts the value from your taxable income and you pay taxes on the remaining taxable income. A credit actually gives you the entire dollar value back or subtracts the value from the taxes you owe – making it far superior to a deduction. In the case of the Saver’s Credit, it is non-refundable, meaning it can only subtract from taxes you owe.

As we’re nearing the end of a calendar year, we’re at an important crossroads of still being able to take advantage of the Saver’s Credit in 2011 and start thinking ahead to 2012. And this year’s Saver’s Credit information has been released as well.

To qualify for the Saver’s Credit in 2011:

savers creditThe AGI (adjusted gross income) limit for the saver’s credit is:

  • $56,500 for married couples filing jointly
  • $42,375 for heads of household
  • $28,250 for married individuals filing separately and for singles

To quality for the Saver’s Credit in 2012:

The AGI (adjusted gross income) limit for the saver’s credit is:

  • $57,500 for married couples filing jointly
  • $43,125 for heads of household
  • $28,750 for married individuals filing separately and for singles

How much is the Saver’s Credit?

The short answer is that it depends on your income level and your contribution amount. It will take a bit of effort to determine how much of a credit you will receive, but don’t let that deter you – it’s free money!

The absolute most you could receive in a given year is $1,000 on a retirement contribution of $2,000. In order to figure out what kind of credit you are eligible to receive, you will have to fill out IRS form 8880 (PDF).

The 2011 and 2012 versions of this form have not yet been released, and it will change, so check back for the 2011 version, which will automatically update when released.

Once you figure out the amount of the credit from form 8880, add it to Form 1040 (PDF), or on Form 1040A (PDF)

Is anyone note eligible for the Credit?

Yes. If you are a full-time student for 5 months out of the calendar year, you are not eligible for the credit. Sorry students!

Also, if your income is above the aforementioned limits, you are ineligible.

Saver’s Credit Discussion:

  • Have you ever claimed the Retirement Savings Contribution Credit?
  • Will you claim the credit in 2011?

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14 Comments »
  • Trevor says:

    I won’t be able to claim either, apparently I make too much. I would humbly disagree with the government on that point though.

  • Natalie says:

    I love this credit and I always try to maximize the amount I receive.

    If you are married, you can claim $1000 per person, for a total of $2000, but you have to put enough money in each person’s name.

    Keep in mind that even if your gross income is more than these amounts you may still qualify, because it’s based on your AGI. Amounts paid into qualified retirement savings, HSAs, and heath care premiums don’t count.

    For example, if you are head of household and make $50k and pay $1k per year through your employer for heath insurance premiums and put $6k in your 401k, you may still qualify. At lower incomes you can get a credit of 50% of your contribution (up to the limit) so it’s like getting a 50% match from the government.

    • Natalie says:

      I just reviewed my contributions for the year and I’m on track to get a 50% credit for a total of $2000. Here’s a real life example. Numbers have been rounded for simplicity.

      AGI needed for 50% credit – <34000 (MFJ)

      Gross income: $42000
      Amount needed in non taxable status: $8000

      Insurance premiums: $1000
      HSA contribution: $3000
      401k/IRA contribution: $4000

      Now this year we've already contributed $4000 to DH's 401k, but none to my IRA. So in order to get the full credit, I need to open a traditional IRA in my name and contribute $2000 before April 15th. I could even file first and then use my tax return to fund my IRA. As long as it's there by the deadline and I have it marked as a 2011 contribution it's on time.

    • Natalie says:

      I didn’t end up getting the full $2k, but I did qualify for the 50% match. The end result was a credit of $1100. I couldn’t get any more because I didn’t have enough tax owed. This is a non-refundable credit. So I just purchased an IRA CD for $200 to maximize my credit. I will do this again for my 2012 taxes.

  • Ron Ablang says:

    I don’t know if I’ll qualify for this, but I will let the tax software ask me that question. I hope it remembers to do that.

  • solo says:

    I was eligible last year and it kept me from owing anything and I got a little back!

  • Jason says:

    The big problem with it is non-refundable, so if you have a zero tax bill without the credit you get zero additional dollars. Also in that AGI range people with children start qualifying for EIC tax credit which is tax refundable.

  • J says:

    If someone received unemployment compensation and put 2,000 away along with being under income threshold in the single threshold. Would the person qualify?

  • Stephen says:

    Question!

    “You were a student if during any part of 5 calendar months of
    2011 you:
    • Were enrolled as a full-time student at a school”

    Does that mean if you were a full time student for 5 months or does that mean you were a full time student in any of the 5 months?

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