From William Perez,
Your Guide to Tax Planning: U.S..
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Individuals who save for retirement may qualify for a federal tax credit. The Retirement Savings Contribution Credit, or the Saver's Credit for short, is a federal tax credit designed to encourage low- and modest-income individuals to save for retirement.

The credit is a percentage of savings, from 10% to 50%. The credit also depends on your overall income and filing status.

Qualifying for the Retirement Savings Tax Credit

You qualify for the Saver's Credit if

• You meet the income criteria,
• You contributed money to a retirement plan,
• You are not a full-time student,
• You are age 18 or older,
• You are not claimed as a dependent.

Income Limits

The income limits for the saver's credit depends on your filing status:

• $26,000 or less for single, married filing separately, and qualifying widow(er).
• $39,000 for head of household.
• $52,000 for married filing jointly.

Dollar Amount of the Saver's Credit

The tax credit is calculated based on a percentage of your retirement contributions up to $2,000. The percentage is determined by your adjusted gross income and your filing status.

The percentage of contributions you get as a tax credit is 10%, 20%, or 50%, depending on your adjusted gross income.

You can contribute to just about any kind of retirement plan, such as 401(k), traditional IRA, Roth IRA, SEP-IRA, SIMPLE IRA, the federal Thrift Savings Plan, or 503(b) plans.

Consider a Roth IRA if You Qualify

If you qualify for the Retirement Savings Tax Credit, consider contributing to a Roth IRA. With a Roth, your contributions enjoy tax-free growth and you won't have to include the Roth distributions in your taxable income when you retire. A Roth plus the saver's credit is a very tax-efficient combination.

Claiming the Saver's Credit

To claim the credit, you will need to fill out Form 8880 (PDF) and attach it to your Form 1040A or 1040.