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Home » IRA's, Retirement Planning, Taxes

Qualifying for the Saver’s Tax Credit in 2014 and 2015

Last updated by on 3 Comments

This post has been updated for the 2014 and 2015 calendar years.

What is the Saver’s Credit?

The Saver’s Credit (aka 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, 403B, 457, or any other IRS recognized retirement account.

What is nice about the Saver’s Credit is that it is an actual tax credit – not merely a tax deduction. If you’re not sure how the two differ, a tax deduction simply subtracts the value from your taxable income and you pay taxes on the remaining taxable income. A tax credit, on the other hand, actually gives you the entire dollar value back or subtracts the value from the taxes you owe – making it far more valuable monetarily than a deduction. In the case of the Saver’s Credit, it is non-refundable, meaning it can only be subtracted from the 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 2014, while starting to plan ahead for 2015.

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 small bit of effort to determine how much of a credit you will receive, but don’t let that deter you – if you are eligible, the result is free money!

The absolute most you could receive in a given year is $1,000 on a retirement contribution of $2,000 (double those numbers if married and filing jointly). In order to figure out what kind of credit you are eligible to receive, you will have to fill out IRS form 8880 (PDF), as the credit phases out at certain income levels.

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

The 2014 and 2015 versions of these forms have not yet been released, but income eligibility and phaseout limits have gone up slightly. I’ve highlighted the maximum income levels to qualify below.

savers credit

Maximum Income Level to qualify for the Saver’s Credit in 2014:

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

  • $30,000 for single filers and married individuals filing separately
  • $45,000 for heads of household
  • $60,000 for married couples filing jointly

Maximum Income Level to qualify for the Saver’s Credit in 2015:

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

  • $30,500 for single filers and married individuals filing separately
  • $45,750 for heads of household
  • $61,000 for married couples filing jointly

Saver’s Credit Eligibility

The following individuals are not eligible for the Saver’s credit:

  1. Those under age 18.
  2. Full-time students (enrolled as full-time for 5 months and over in a calendar year).
  3. Those claimed as dependent on another person’s return.
  4. Those at income levels above the aforementioned limits.

Saver’s Credit Discussion:

  • Have you ever claimed the Retirement Savings Contribution Credit (Saver’s Credit)?

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3 Comments »
  • Allison E says:

    What I don’t understand is why I cannot take this saver’s credit because my husband is a student. I have a Roth IRA (individual of course), and I am NOT a student, but still my tax program isn’t letting me take this credit because my husband is in graduate school.

  • Rick says:

    For 2013 tax year they have limited the tax credit to the amount of taxes you owe. Because of this we cannot take the full $2,000 credit and also cannot take $350 in tax credits for energy efficient furnace and air conditioner that we could have taken in 2012. That’s a difference of $867 less! Understandable but still a disappointment. :(

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