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Maximize Your Savings with the Saver’s Tax Credit
By O1ne Mortgage
What Is the Saver’s Tax Credit?
The Saver’s Tax Credit, also known as the Credit for Qualified Retirement Savings, is a valuable incentive for low- and moderate-income taxpayers to save for retirement. This credit can reduce your tax bill dollar for dollar by up to $1,000, or up to $2,000 if you’re married and filing jointly. The credit is calculated as a percentage of up to $2,000 in contributions ($4,000 for joint filers) to retirement accounts, and it decreases as your adjusted gross income (AGI) increases.
Who Qualifies for the Saver’s Credit?
To be eligible for the Saver’s Credit, you must meet the following criteria:
- Be 18 years or older
- Not be claimed as a dependent on another person’s tax return
- Not be a full-time student
Eligible contributions can be made to a traditional or Roth IRA, an employer-sponsored retirement plan (such as a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE), or an ABLE account where you are the designated beneficiary. Note that rollover contributions are not eligible for the Saver’s Credit, and your eligible contribution may be reduced if you received distributions from a retirement or ABLE account.
How Does the Saver’s Credit Work?
To determine your eligibility and the amount of your Saver’s Credit, refer to the following charts based on your filing status and adjusted gross income:
2022 Saver’s Credit
| Credit Amount | Married Filing Jointly | Head of Household | Single, Married Filing Separately & Qualifying Widow(er) |
|---|---|---|---|
| 50% | AGI up to $41,000 | AGI up to $30,750 | AGI up to $20,500 |
| 20% | $41,001 – $44,000 | $30,751 – $33,000 | $20,501 – $22,000 |
| 10% | $44,001 – $68,000 | $33,001 – $51,000 | $22,001 – $34,000 |
| 0% | $68,001 and up | $51,001 and up | $34,001 and up |
2023 Saver’s Credit
| Credit Amount | Married Filing Jointly | Head of Household | Single, Married Filing Separately & Qualifying Widow(er) |
|---|---|---|---|
| 50% | AGI up to $43,500 | AGI up to $32,625 | AGI up to $21,750 |
| 20% | $43,501 – $47,500 | $32,626 – $35,625 | $21,751 – $23,750 |
| 10% | $47,501 – $73,000 | $35,626 – $54,750 | $23,751 – $36,500 |
| 0% | $73,001 and up | $54,751 and up | $36,501 and up |
Other Tax Credits to Consider
In addition to the Saver’s Credit, there are several other tax credits that can help reduce your tax burden:
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is a refundable tax credit for low- and moderate-income taxpayers. For the 2022 tax year, the credit ranges from $560 to $6,935, and for 2023, it ranges from $600 to $7,420. To qualify, you must have worked and earned less than $59,187, with investment income of less than $10,300 in the 2022 tax year.
Child and Dependent Care Credit
If you paid for child care or care for another dependent so you could work or look for work, you may be eligible for the Child and Dependent Care Credit. This nonrefundable credit is equal to 20% to 35% of your work-related care expenses, up to $3,000 for one dependent or $6,000 for two or more dependents.
Lifetime Learning Credit
The Lifetime Learning Credit is a nonrefundable credit of up to $2,000 for qualifying post-secondary educational expenses. This credit is available to students or parents of students, with income limits applying.
The Bottom Line
Not every taxpayer qualifies for the Saver’s Credit, but if you do, it can provide significant tax savings and an added incentive to plan for your future. Starting in 2027, the Saver’s Credit is expected to transition to the Saver’s Match, which will add up to $1,000 ($2,000 for married couples filing jointly) to a qualifying taxpayer’s retirement account as an incentive to save.
For expert mortgage services and to learn more about how you can maximize your savings, contact O1ne Mortgage at 213-732-3074. Our team of professionals is here to help you navigate your financial journey and achieve your goals.
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