What is the Retirement Savings Contributions Credit?




Yet another case where NOT making much money actually pays off. If your income is below the following adjusted gross income (AGI) levels for the 2018 and 2019 tax years, you may be eligible for the Retirement Savings Contribution Credit (The Saver’s Credit) on your tax return.

That’s right, this is not a deduction, but a credit, just for saving money. Here are the income limits to quality.

Maximum Income Level to qualify for the Retirement Savings Contribution Credit in 2018:

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

  • $31,500 for single filers and married individuals filing separately
  • $47,250 for heads of household
  • $63,000 for married couples filing jointly

Maximum Income Level to qualify for the Retirement Savings Contribution Credit in 2019:

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

  • $32,000 for single filers and married individuals filing separately
  • $48,000 for heads of household
  • $64,000 for married couples filing jointly

Check out the full Saver’s Credit update here.

Am I Eligible for the Retirement Savings Contribution Credit?

retirement savings contribution creditIf you are below the previously mentioned income thresholds, you simply need to make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA). The amount of the saver’s credit you can get is based on the contributions you make and your credit rate (which depends on your income level).

How Much is the Credit Worth?

If you are eligible for the credit, your credit rate can be as low as 10% or as high as 50%, depending on your adjusted gross income. The lower your income is, the higher the credit rate.

Your credit rate also depends on your filing status. The maximum credit anyone could receive is 50% on a $2,000 contribution (for $1,000), but your total may vary. To figure out exactly how much you can make, use IRS Form 8880, also known as the Credit for Retirement Savings Contributions.




How Can I Claim the Retirement Savings Contribution Credit?

Once you’ve filled out Form 8880, enter the amount of the credit on Form 1040 (PDF), or on Form 1040A (PDF). You cannot use Form 1040EZ to claim this credit. If you’re looking for further information, you can also check out Chapter 3 of IRS Publication 590, Individual Retirement Arrangements (IRAs), for more information.

One last thing – if you are a full-time student for 5 months out of the calendar year, you are not eligible for the credit.

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  1. Diana

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