Low- and moderate-income taxpayers can save for retirement now and possibly earn a tax credit in 2025 and future years thanks to the Retirement Savings Contributions Credit, also known as the Saver’s Credit. This credit can help offset a portion of the first $2,000 ($4,000 if married filing jointly) you voluntarily contribute to Individual Retirement Arrangements (IRAs), 401(k) plans and similar workplace retirement programs.
The credit can also help eligible people with disabilities who are the designated beneficiary of an Achieving a Better Life Experience (ABLE) account and contributes to that account.
The maximum Saver’s Credit is $1,000 ($2,000 for married couples). If you are eliible, the credit can increase your refund or reduce the tax owed but is affected by other deductions and credits. Rollover contributions do not qualify for the credit, and distributions from a retirement plan or ABLE account reduce the contribution amount used to figure the credit.
Who is eligible?
You are eligible for the credit if you are:
- Age 18 or older,
- Not claimed as a dependent on another person’s return, and
- Not a full-time student.
Furthermore, the Saver’s Credit can be claimed by:
- Married couples filing jointly with adjusted gross incomes up to $76,500.
- Heads of household with adjusted gross incomes up to $57,375.
- Married individuals filing seperately and singles with adjusted gross incomes up to $38,250.
- Qualified surviving spouse filers.
Contribution deadlines
Individuals with IRAs have until April 15, 2025 – the due date for filing their 2024 return – to set up a new IRA or add money to an existing IRA for 2024. Both Roth and traditional IRAs qualify.
Contributions to workplace retirement plans must be made by December 31 to a:
- 401(k) plan.
- 403(b) plan for employees of public schools and certain tax-exempt organizations.
- Governmental 457 plan for state or local government employees.
- Thrift Savings Plan (TSP) for federal employees.