Tax Guide

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Retirement Saver’s Credit

Low- and moderate-income employees can earn a special tax credit for saving for retirement. Also known as the Retirement Savings Contributions Credit, this helps offset the first $2,000 voluntarily contributed to IRAs, 401(k)s and similar workplace retirement programs.

There are certain limits in time and money that must be met in order to qualify for the credit. To claim the credit on your 2016 tax return:

  • The retirement account must have been set up no later than April 15, 2016.
  • Contributions for 2016 must have been made by the April 15, 2017 cutoff date.
  • The credit is limited to:
    • Married couples filing jointly with income of up to $61,500
    • Heads of household with income up to $46,125
    • Singles and those married filing separately with income up to $30,750
  • Eligible taxpayers must be at least 18, not a student, and not a dependent on another taxpayer’s return.

Like other refundable credits, the Retirement Saver’s Credit can reduce the tax you owe, or increase your refund. The credit is limited to a certain percentage of your retirement contributions, depending on your adjusted gross income; the percentage ranges from 50 percent and goes down to zero. That maximum credit is $1,000 for singles and heads of household, and $2,000 for married taxpayers filing jointly. For many taxpayers, the credit amount will be less than the full amount, and for some, it could work out to be zero.

Use our Form 8880 screen to apply for the credit when you do your taxes on 1040.com.