Gusto 401(k) participants and individual retirement account (IRA) savers can use this article to learn how the Saver's Credit works and whether you may be eligible to claim it on your taxes.
If you contribute to a retirement account, the Internal Revenue Service (IRS) may reward you with a tax credit that reduces what you owe—on top of the tax benefits your retirement account already provides.
The Saver's Credit lets eligible taxpayers claim a credit for contributions to an employer-sponsored retirement plan or IRA.
Note: A tax credit is different from a tax deduction. A deduction reduces your taxable income, while a credit reduces your tax bill dollar for dollar.
To qualify for the Saver's Credit, you need to meet all three of these criteria:
You are 18 years of age or older.
You are not a full-time student.
You are not claimed as a dependent on someone else's tax return.
Your credit amount depends on your adjusted gross income (AGI). Single filers can claim up to 50% of $2,000 in contributions, for a maximum credit of $1,000. Married couples filing jointly can claim up to 50% of $4,000, for a maximum credit of $2,000.
Review the IRS income table to see how much you may be eligible to get based on your AGI.
If you qualify, the Saver's Credit reduces the taxes you would otherwise owe. It rewards you for contributing to your retirement.
If your credit is more than what you owe, you can carry over the remaining amount.
This means contributing to your retirement account can benefit you twice—once through your account's existing tax advantages, and again through the Saver's Credit.
This information is for general education purposes only and not intended to be tax advice. We encourage you to consult a qualified tax professional before requesting a distribution.