The Little-Known “Retirement Savings Contributions Credit”

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You probably know about the benefits of tax-deferred investment accounts. But did you know that there is a special IRS provision that potentially allows you to save money just for being a retirement saver? The so-called “saver’s credit,” formally known as the Retirement Savings Contributions Credit, permits certain low- to middle-income workers to claim a tax credit for making eligible contributions to an IRA or most qualified workplace retirement plans.

However, this tax break is currently going largely untapped. According to a study by the nonprofit Transamerica Center for Retirement Studies, only about a third of U.S. workers are aware of the saver’s credit.¹

Rules for the Retirement Savings Contributions Credit

In order to claim the credit, the IRS ² requires that you:

● Are at least 18 years old;

● Are not a full-time student; AND

● Cannot be claimed as a dependent on another person’s tax return.

Retirement plans eligible for the credit include:

● Traditional or Roth IRAs

● 401(k)s and 403(b)s



● 501(c)(18) or governmental 457(b) plans

● Voluntary after-tax employee contributions to qualified retirement and 403(b) plans.

The Amount You Can Claim

According to the IRS, “The amount of the credit is 50%, 20% or 10% of your retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly), depending on your adjusted gross income (reported on your Form 1040 or 1040A).”

Here’s a breakdown for tax year 2016:

Credit rate

Married filing jointly

Head of household

All other filers*

50% of contribution

AGI not more than $37,000

AGI not more than $27,750

AGI not more than $18,500

20% of contribution




10% of contribution




0% of contribution

more than $61,500

more than $46,125

more than $30,750

*Single, married filing separately, or qualifying widow(er).

To learn more about the saver’s credit visit the IRS website. For help shaping up your retirement planning and/or tax planning strategy contact your CPA or Certified Financial Planner™.

¹ Transamerica Center for Retirement Studies, “Retirement Throughout the Ages: Expectations and Preparations of American Workers,” May 2015.

² IRS, “Retirement Savings Contributions Credit,” updated February 22, 2016.

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