Saver's Credit allows individuals to contribute up to $2,000 to a retirement plan and receive a credit.
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In IR-2023-222, the Internal Revenue Service (IRS) reminded low- and moderate-income taxpayers that they can benefit from a "Saver's Credit" in 2024.
The Saver's Credit allows individuals to contribute up to $2,000 to a retirement plan and receive a credit. The credit is also available to individuals who are a beneficiary of an Achieving a Better Life Experience (ABLE) account.
The maximum credit is $1,000 for a retirement contribution of $2,000. The maximum is increased to $2,000 for a retirement contribution of $4,000 by a married couple.
Taxpayers 18 or older are eligible for the Saver's Credit if they are not claimed as a dependent on another individual's tax return and not a student. A student is defined as a person who was a full-time student or in a full-time training course for five calendar months during a tax year.
The Saver's Credit is 50% of the initial income level, 20% for the next level and 10% for the third level. The contribution of up to $2,000 may be to a traditional or Roth IRA, 401(k), 403(b) or governmental 457(b) plan. It is also possible to qualify for a transfer to a Federal Thrift Savings Plan.
There are limitations on the Saver's Credit. A rollover contribution, such as a transfer from one IRA account to a new one, does not qualify. There may also be some reductions if you have taken a distribution this year from a qualified retirement plan or ABLE account.
The married-couple limits for the three levels are a 50% credit for incomes up to $43,500, a 20% credit for those with added earnings up to $47,500 and a 10% credit for any additional earnings up to $73,000. The single individual may qualify for the 50% credit amount with earnings up to $21,750, a 20% credit for additional earnings up to $23,750 and a 10% credit for added earnings up to $36,500.
The Saver's Credit timing includes this year or a contribution prior to April 15, 2024. This is similar to the rules that allow an individual to set up an IRA for 2023 until the tax-return due date for 2024.
Additional information on the Saver's Credit is available in the instructions for IRS Form 8880, Credit for Qualified Retirement Savings Contributions.
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