Low- and moderate-income employees can earn a special tax credit for saving for retirement. Also known as the Retirement Savings Contributions Credit, the credit helps offset voluntary contributions to IRAs, 401(k)s and similar workplace retirement programs.
The Retirement Saver’s Credit is nonrefundable. It's 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. The 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, could work out to be zero.
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 2020 tax return:
- Contributions for 2020 must have been made by the tax deadline (April 15, 2021).
- For 2020 returns, the credit is limited to:
- Married couples filing jointly with income of up to $65,000
- Heads of household with income up to $48,750
- Singles and those married filing separately with income up to $32,500
- Eligible taxpayers must be at least 18, not a student, and not a dependent on another taxpayer’s return.
Use our Form 8880 screen to apply for the credit when you do your taxes on 1040.com.