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What Is The Savers Credit?

Updated for Tax Year 2015


The Savers Credit gives a special tax break to low- and moderate-income taxpayers who are saving for retirement.

Formerly called the Retirement Savings Contributions Credit, the Savers Credit gives a special tax break to low- and moderate-income taxpayers who are saving for retirement. This credit is in addition to the other tax benefits for saving in a retirement account. If you qualify, a Savers Credit can reduce or even eliminate your tax bill.

Unfortunately, many eligible taxpayers don't take advantage of this break because they don't know about it. Indeed, a recent survey* shows that only 12% of American workers with annual household incomes of less than $50,000 are aware of the Savers Credit.

How much could the Savers Credit cut from my tax bill?

Depending on your adjusted gross income and tax filing status, you can claim the credit for 50%, 20% or 10% of the first $2,000 you contribute during the year to a retirement account. Therefore, the maximum credit amounts that can be claimed are $1,000, $400 or $200.

The biggest credit amount a married couple filing jointly can claim together is $2,000. But if you and/or your spouse took a taxable distribution from your retirement account during the two years prior to the due date for filing your return (including extensions), that distribution reduces the size of the Savers Credit available to you.

The Savers Credit is a 'non-refundable' credit. That means this credit can reduce the tax you owe to zero, but it can't provide you with a tax refund.

Which retirement accounts qualify for the credit?

The Savers Credit can be claimed for your contributions to a 401k, 403(b), 457 plan, a Simple IRA or a SEP IRA. (You can’t claim your employer's contributions to these accounts, however.) Your contributions to a traditional IRA or a Roth IRA are also eligible for the Savers Credit.

Am I eligible?

To claim a Savers Credit, you must be age 18 or older and you cannot be a full-time student or be claimed as a dependent on someone else's tax return. Your retirement contribution must have been made during the tax year for which you are filing your return. And you must meet the income requirements.

In 2015, the maximum adjusted gross income for Savers Credit eligibility is $60,000 for a married couple filing jointly, $45,000 for a head of household, and $30,000 for all other taxpayers. The maximum credit you can claim phases out as your income increases.

2015 Adjusted Gross Income:

Credit Single Filer               Head of Household         Joint Filers
50% $18,250 or less         $27,375 or less                $36,500 or less
20% $18,251-$19,750      $27,376-$29,625             $36,501-$39,500
10% $19,751-$30,500      $29,626-$45,750            $39,501-$61,000


John and Maria are married and file jointly. He’ll contribute $1,000 to his 401(k) plan this year. She’ll contribute $1,000 to an IRA. Their 2015 combined adjusted gross income is $33,500. Each of them is therefore eligible to claim a 50% credit for their contributions. Together, their credits are worth $1,000.

Christine files as a head of household. She’ll contribute $1,200 to her 403(b) plan this year. If her 2015 adjusted gross income is $28,000, she can claim a 20% Savers Credit for her contribution, worth $240.

How do I claim the Savers Credit?

To claim the credit, use Form 8880, "Credit for Qualified Retirement Savings Contributions."

Heads-up: You can only claim the Savers Credit if you use form 1040A, 1040 or 1040NR (not supported in TurboTax) to file your federal tax return. Although the IRS has included information about the Savers Credit in the instructions for Form 1040EZ, those instructions direct you to a different form. You can't claim it on Form 1040EZ.

Remember, when you use TurboTax to prepare your taxes, we’ll help you find all the deductions and credits you qualify for – you just need to answer simple, plain-English questions and let TurboTax handle the rest.

*Transamerica Center for Retirement Studies, 11th Annual Survey, conducted online within the United States by Harris Interactive on behalf of Transamerica Center for Retirement Studies between December 3, 2009 and January 18, 2010 among 3,598 full-time and part-time workers.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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