The Saver’s Credit presents a significant opportunity for low- to moderate-income Americans who contribute to their retirement savings. This tax break, often overlooked, can provide financial relief for those eligible. With the credit worth up to $1,000 per filer, and potentially offsetting as much as 50% of retirement contributions, individuals have until the end of the tax year to make qualifying contributions and claim this benefit on their 2024 returns. However, awareness remains low, with only about half of U.S. workers familiar with the credit.
The Saver's Credit operates by offering a maximum of $1,000 for single filers and $2,000 for married couples filing jointly. While it can significantly offset retirement contributions — up to $2,000 for singles and $4,000 for couples — the credit is non-refundable. This means it cannot reduce tax liability below zero. In 2022, the average credit claimed was $194, indicating that many eligible taxpayers do not fully capitalize on this benefit.
Despite its potential value, the Saver's Credit suffers from low uptake. Only 5.8% of tax returns in 2022 claimed this retirement savings contributions credit. Several factors contribute to its underutilization: its intricate design and a general lack of awareness among workers. As income increases, the percentage of the credit decreases from 50% to 20% and 10%, eventually phasing out completely for individuals earning above $38,250 or joint filers above $76,500.
For those looking to claim the maximum 50% credit in 2024, adjusted gross income must not exceed $23,000 for single filers or $46,000 for married couples. The IRS provides tools to assist taxpayers in determining their eligibility for this credit. In light of these complexities and its limited visibility, Emerson Sprick from the Bipartisan Policy Center acknowledges the challenge:
"Everyone hopes that it's going to be easier,"
- Emerson Sprick, associate director for the Bipartisan Policy Center's Economic Policy Program.
Looking ahead, the Saver's Credit is set to transition into the "Saver's Match" by 2027. This new initiative will deposit funds directly into taxpayers' retirement accounts, potentially simplifying access to these benefits and increasing participation rates.