The IRS (Internal Revenue Service) reminds taxpayers of the different credits that they may want to take advantage of if eligible. One clear example is the Retirement Savings Contributions Credit. In fact, it may not ring a bell with you because it is commonly known as the Saver’s Credit. Bear in mind that it is a non-refundable tax credit.
What is more, you may only qualify for the Saver’s Credit if your income is low to moderate claims the IRS. Of course, you will have to make contributions to eligible retirement accounts to be eligible for this non-refundable tax credit. The thing is, even if it is not refundable, it can considerably reduce your tax bill if you get the maximum amount possible in 2025.
IRS Maximum Amount of the Saver’s Credit
Not all taxpayers who make contributions to an eligible retirement savings account qualify for the same amount. It depends on your AGI (Adjusted Gross Income), which you report on your Form 1040 series return.
For example, it could be 50%, 20% or 10% of the contribution workers make to traditional or Roth IRA, elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan, contributions to a 501(c) (18) (D) plan, voluntary after-tax-employee contributions made to a qualified retirement plan or 403 (b) plan or contributions made to eligible ABLE accounts if you are a designated beneficiary.
The maximum contribution amount that may qualify for the credit is $2,000. However, it could be $4,000 if you are married filing jointly. Thus, it makes the maximum credit of $1,000 ($2,000 if you are married and have decided to file jointly).
How Can You Calculate the Amount of This IRS Credit?
All you have to do is check the Saver’s Credit Income limits and the percentage you may qualify for. To get more information about this topic, visitthe IRS official website at: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-credit-savers-credit
Saver’s Credit Income Limits (2024)
- 50% Credit Rate
- Married Filing Jointly: AGI not more than $46,000
- Head of Household: AGI not more than $34,500
- All Other Filers: AGI not more than $23,000
- 20% Credit Rate
- Married Filing Jointly: $46,001 – $50,000
- Head of Household: $34,501 – $37,500
- All Other Filers: $23,001 – $25,000
- 10% Credit Rate
- Married Filing Jointly: $50,001 – $76,500
- Head of Household: $37,501 – $57,375
- All Other Filers: $25,001 – $38,250
- 0% Credit Rate (Not Eligible)
- Married Filing Jointly: More than $76,500
- Head of Household: More than $57,375
- All Other Filers: More than $38,250
An example may help you understand it better. A taxpayer is married and earned $41,000 in 2024, and the spouse was unemployed and had no earnings. This taxpayer contributed $2,000 to his or her IRA account for 2024.
After deducting the IRA contribution, the AGI (Adjusted Gross Income) shown on the tax return after filing jointly is $39,000. As a result, this taxpayer can claim a 50% credit of $1,000 for having contributed $2,000 to an IRA account in 2024 and claiming it on the tax return.
