Get tax credit for saving for retirement

Preparing for retirement |

For certain income brackets, saving for retirement can mean discounts on taxes

A store sometimes offers a discount for buying clothing, food or other items. Likewise, the government gives discounts when you save for retirement if you are within a certain income range and meet other eligibility requirements.*

Called the Saver’s Tax Credit, this discount applies to the first $2,000 ($4,000 for married couples) you contribute to a retirement plan. See the table below to see if you qualify.

An example

Monica, a single adult, filing her 2018 taxes

  • Annual salary: $25,000 a year
  • Contribution to retirement plan: $1,500 ($29/week)
  • Tax credit from IRS: 10% discount on her tax return
  • Benefit: $150 kept in her pocket rather than paid in federal taxes

2018 income levels

Joint Filers Heads of Household  All other Filers  Credit Rate 
 $0 - $38,000  $0 - $28,500  $0 - $19,000  50%
 $38,001 - $41,000  $28,501 - $30,750  $19,001 - $20,500  20%
 $41,001 - $63,000  $30,751 - $47,250  $20,501 - $31,500  10%
 Over $63,000  Over $47,250  Over $31,500  0%

Source: IRS.gov

How to receive your tax credit

If you meet the income guidelines, take five minutes to fill out the Tax Form 8880, Credit for Qualified Retirement Savings Contributions. Then send this completed form with your regular tax forms when you file your taxes for 2018.Congratulations! You’re done.

Plan now

Save more in 2019 and take advantage of the tax credit in the future.

2019 income levels

Joint Filers Heads of Household  All other Filers  Credit Rate 
 $0 - $38,500  $0 - $28,875  $0 - $19,000  50%
 $38,501 - $41,500  $28,876 - $31,125  $19,001 - $20,500  20%
 $41,501 - $64,000  $31,126 - $48,000  $20,501 - $31,500  10%
 Over $64,000  Over $48,000  Over $31,500  0%

Source: IRS.gov

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Disclosure

*You must be at least 18 years old, not a full-time student and not be claimed as a dependent on another taxpayer’s income tax return. You must make eligible contributions to your IRA or employer-sponsored retirement for the tax year for which you are claiming the income tax credit. 

This material is intended to provide general information. It is not intended as legal or tax advice. Please consult your tax attorney or accountant on specific questions related to your situation.

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