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 CreditYou 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 LimitsThe Saver's Credit is limited by a person's adjusted gross income. The income limits for the year 2013 for the saver's credit depends on your filing status:
- $28,750 or less for single, married filing separately, and qualifying widow(er).
- $43,125 for head of household.
- $57,500 for married filing jointly.
Dollar Amount of the Saver's CreditThe tax credit is calculated based on a percentage of your retirement contributions. The maximum credit is $2,000 for unmarried filers and $4,000 for married filers. 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. A chart with the tax credit percentages is found on page 2 of Form 8880.
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 QualifyIf 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 CreditTo claim the credit, you will need to fill out Form 8880 (PDF) and attach it to your Form 1040A or 1040.