For taxpayers who are at lower income levels and who contribute to an IRA or other retirement plan, there may be a lucrative tax bonus in the form of the Saver's Credit. There is a catch. Those who qualify must claim it.
The Retirement Savings Contributions Credit – more generally called the Savers' Credit, is a dollar-for-dollar tax credit designed to provide low-income Americans with an incentive to save for their own retirement security.
To be eligible a taxpayer must be at least 18 years old, must not be a full-time student, and not be named as a dependent on someone else's income tax return.
Note: Taxpayers who filed Form 1040EZ cannot claim this credit, but instead, must have filed Form 1040, 1040A or 1040NR.
Limits
For tax year 2022, the threshold is as follows:
Taxpayers who are married, filing jointly
- With adjusted gross income of $41,000 or less the credit is 50%. (Up from $39,500 in 2021.)
- With adjusted gross income of $41,001 to $44,000, the credit is 20%. (Up from $39,501 to $43,000 in 2021.)
- With adjusted gross income of at least $44,001 up to $68,000, the credit is 10%. (Up from $43,001 to $66,000 in 2021.)
- The credit phases out completely for those with adjusted gross incomes exceeding $68,000. ($66,000 in 2021.)
Taxpayers who file as head of household
- With adjusted gross income of $30,750 or less, the credit is 50%. (Up from $29,625 in 2021)
- With adjusted gross income of $30,751 to $33,000, the credit is 20%. (Up from $29,626 to $32,250 in 2021).
- With adjusted gross income of $33,301 to $51,000, the credit is 10%. (Up from $32,251 to $49,500 in 2021).
- The credit phases out completely for those with adjusted gross incomes exceeding $51,000. (up from $49,500 in 2021).
For all other filers
- With adjusted gross income of $20,500 or less, the credit is 50%. (Up from $19,750 in 2021.)
- With adjusted gross income of $20,501 to $22,000, the credit is 20%. (Up from $19,751 to $21,500 in 2021.)
- With adjusted gross income of $22,001 to $34,000, the credit is 10%. (Up from $21,501 to $33,000 in 2021)
- The credit phases out completely for those with adjusted gross incomes exceeding $34,000. ($33,000 in 2021.)
