Over the years, I’ve been given a couple of simple but profound pieces of financial advice. A man I looked up to told me that tax loopholes are illegal, but if something is in the IRS code it’s there to be used and if it applies to me… use it.
Another great financial sage told me, “Never leave money on the table.” Simple, but accurate.
With those two pieces of advice in mind, I’m going to tell you about a federal tax credit that the bulk of America doesn’t know about. It’s called the Retirement Savings Contributions Credit or the Saver’s Credit.
According to the 21st Annual Transamerica Retirement Survey of Workers, published by the Transamerica Center for Retirement Studies, the older you are the less likely you are to be aware of the Saver’s Credit. Those who know about it by generation:
- 26% of Baby Boomers (Born 1946-1964)
- 46% of Generation X (Born 1965-1980)
- 46% of Generation Z (Born 1981-1996)
- 63% of Millennials (Born 1997-2012)
To be eligible for the Saver’s Tax Credit for tax year 2021 you must:
- Be 18 years old or older
- Not a full-time student
- Not claimed as a dependent on someone else’s tax return.
- Have adjusted gross income of no more than $66,000 if you file taxes as married filing jointly, or $49,500 if you file as head of household, or $33,000 for all other filing options.
- Contribute to an eligible retirement plan which includes
- Traditional IRA
- Roth IRA
- 401(k)
- 403(b)
- 457 government plan
- SARSEP
- SIMPLE plan
- Federal Thrift Savings Plan
- 501 (c) (18) (D)
- ABLE account for which you are the designated beneficiary
If you are eligible for the Saver’s Credit, it’s worth between 10% and 50% of your contribution. The maximum dollar amount of the credit is $1,000 or $2,000 for married couples filing jointly.
2021 Saver’s Credit
| Credit Rate | Married Filing Jointly | Head of Household | All Other Filers* |
| 50% of your contribution | AGI not more than $39,500 | AGI not more than $29,625 | AGI 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 contribution | more than $66,000 | more than $49,500 | more than $33,000 |
*Single, married filing separately, or qualifying widow(er)
Chart courtesy IRS
The Saver’s tax credit is certainly in the IRS code. If it applies to you—use it.
This article is presented as information only and should not be considered tax or legal advice.