Saver's Credit

The middle- and lower-income employees who participate in a qualified retirement plan may be eligible to claim a federal income tax credit based on their contributions. The Saver’s Credit is a fairly new provision of the federal tax code specifically aimed at rewarding middle- and lower-income employees for their retirement saving.

What is the Saver’s Credit

The Saver’s Credit is an incentive for middle- and lower-income taxpayers to save in certain qualified retirement accounts (401(k)s, 403(b)s, IRAs, etc).

The Saver’s Credit helps households in the 15 percent or lower federal income tax bracket (the majority of workers in the US) by augmenting the traditional tax incentives for saving.

Tax incentives have traditionally rewarded saving based on income. This system provides a much greater incentive to save for those in higher income brackets. The Saver’s Credit addresses this upside-down incentive by offering an additional reward for saving to middle- and lower-income taxpayers.

In addition to helping households save more for retirement, the Saver’s Credit also helps employers sponsoring plans because it encourages more middle- and lower-income employees to save. This will usually improve the plan’s score on the nondiscrimination tests.

Who May Be Eligible for the Saver's Credit

To qualify for the Saver’s Credit, employees:

Must be 18 or older
Cannot be a full-time student
Cannot be claimed as a dependent on another person’s return; and
Must have contributed to a qualified retirement plan or an IRA this tax year.
Contributions up to $2,000 count toward the credit.

For more information reivew:

Saver's Credit data compiled by AARP.