2021 vs 2022 Savers Tax Credit and Income Limits to Help Workers Save for Retirement

[Updated with latest details per the IRS] The savers credit helps middle to lower income earners save for retirement by providing an offset to retirement plan (401k and IRA) contributions. But a lot of people don’t know about or take advantage of this little known credit, officially referred to by the IRS as the retirement savings contributions credit.

The retirement savings contribution or savers credit was made a permanent part of the tax code in 2006 and is now adjusted annually to keep pace with inflation. You can see recent changes and qualification limits in the table below. The credit is available in addition to any other tax savings that apply to qualified retirement plan contributions.

The savers credit works by offsetting part of the first $2,000 (singles) or $4,000 (married) workers voluntarily contributions to tax advantaged retirement plans such as IRAs and employer sponsored workplace plans. Up to 50% of the contribution can be claimed as a credit making the maximum credit $1,000 ($2,000 if married filing jointly).

The amount of the credit is either 50%, 20% or 10% of your qualified retirement plan contributions up to the maximum credit amount. The percentage (%) threshold is based on your adjusted gross income reported on your Form 1040 or 1040A tax return.

Example: Marcus is married worked earning $41,000 in 2021. His wife is a stay-at-home mon and does not work. Marcus contributed $2,000 to his IRA for 2021. After deducting his IRA contribution, the adjusted gross income shown on his joint return is $39,000. Based on the 2021 thresholds Marcus can claim a 50% savers credit of $1,000 (maximum) for his $2,000 IRA contribution on his 2021 tax return.

2022 Saver’s Credit

Credit RateMarried Filing JointlyHead of HouseholdAll Other Filers*
50% of your contributionAGI not more than $41,000AGI not more than $30,750AGI not more than $20,500
20% of your contribution$41,001 – $44,000$30,751 – $33,000$20,501 – $22,000
10% of your contribution$44,001 – $68,000$33,001 – $51,000$22,001 – $34,000
0% of your contributionmore than $68,000more than $51,000more than $34,000
Source : IRS

2021 Saver’s Credit

Credit RateMarried Filing JointlyHead of HouseholdAll Other Filers*
50% of your contributionAGI not more than $39,500AGI not more than $29,625AGI not more than $19,750
20% of your contribution$39,501 – $43,000$29,626 – $32,250$19,751 – $21,500
10% of your contribution$43,001 – $66,000$32,251 – $49,500$21,501 – $33,000
0% of your contributionmore than $66,000more than $49,500more than $33,000
Source: IRS

One thing to note is that the savers credit is a refundable tax credit. Meaning that the actual credit amount you get back in your tax refund is offset against the taxes you owe.  If you don’t owe taxes then you won’t get the credit.

Based on the most recent statistics the IRS reported that over $1.2 billion of saver’s credits was claimed with the average claimed averaging $205 for joint filers, $165 for heads of household and $127 for single filers

In addition to income thresholds and contributing to a qualified retirement plan, you have meet the following eligibility criteria: be 18 or older; are not a full-time student and are not being claimed as a dependent on another person’s tax return.

To claim the credit use form 8880 or any recommended tax software. Eligible taxpayers must also be at least 18 years of age and not be enrolled as a full-time student. You have until April 15 of the subsequent year to set up a new and/or add to an existing IRA and still get the savers credit.

However, elective deferrals (contributions) must be made by the end of the calendar year to a 401(k), 457 or 403(b) plan or similar employer sponsored plan.

You can claim the full savers credit (if eligible) in addition to other ones like the earned income and child tax credits.

See more on retirement plans in the 401K/IRA resource page.  For more on this credit see the official IRS page.

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3 thoughts on “2021 vs 2022 Savers Tax Credit and Income Limits to Help Workers Save for Retirement”

  1. Fran is correct. It is not a refundable credit. The line should be edited which says: “Meaning that you get the actual credit amount back in your tax refund…”

    (2017 is our first year to take the credit, which completely wipes out our Federal tax liability. If it were a refundable credit we would get a $375 refund, in addition to taxes that were withheld.)

    I’m glad to see that the credit is available for 2018. Anyone know what the income level is to get the full credit for a couple filing jointly? In 2017, if a couple has taxable income of less than 37,000 (and both contribute at least 2000 to tax-deductible accounts) then they get a $2000 credit toward their tax liability. I’m going with the hope that it increases to 38,000 for 2018. I was hoping the income thresholds for the 50%, 20% & 10% levels would be posted here.

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  2. “Meaning that you get the actual credit amount back in your tax refund or subtracts the value from the taxes you owe.” You might want to review form 8880 as this information is not correct. I have been taking this credit since its inception and the value of the tax credit is lowered to the amount of taxes owed. There is no additional refund if nothing is owed or the taxable amount is lower than the tax credit.

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