ECONOMY & WORK
MONEY 101
NEWS
PERSONAL FINANCE
NET WORTH
About Us Contact Us Privacy Policy Terms of Use DMCA Opt-out of personalized ads
© Copyright 2023 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.
MARKETREALIST.COM / PERSONAL FINANCE

How to Claim This Lesser-Known Tax Credit That Could Get You up to $2,000

To be able to claim the saver's credit for last year, you must be 18 years or older and you cannot be a full-time student.
PUBLISHED FEB 1, 2024
Cover Image Source: Tax credits (representative image) | Pexels | Photo by Karolina Grabowska
Cover Image Source: Tax credits (representative image) | Pexels | Photo by Karolina Grabowska

Many Americans are yet to start saving for their retirement, but if you are one of those who have already started, then you could be eligible for a lesser-known tax credit that could score you up to $2,000 in free government money. According to a Transamerica Center for Retirement Studies survey, less than 49% of United States workers are aware of the tax credit called the saver's credit, credited as part of the government's way of asking people to save for retirement. This credit cuts the federal income taxes of those facing competing financial priorities to make it easier for workers to save, per TCRS. 

"On top of the tax-deferred benefits of saving for retirement in a 401(k), 403(b) or IRA, the saver’s credit is an additional benefit that may reduce a person’s federal taxes," Collinson said in a press release. "Many eligible retirement savers could be confusing these incentives, simply because the idea of a double tax benefit sounds too good to be true." Unlike a deduction, a tax creditinb is a dollar-for-dollar reduction of your federal income tax liability, so it's free income, per Moneywise. 

Pexels | Photo by Nataliya Vaitkevich
Saver's credit (representative image) | Pexels | Photo by Nataliya Vaitkevich

To be able to claim the saver's credit for last year, you must be 18 years or older and you cannot be a full-time student. It's also important to note that you cannot claim it as a dependent on another's tax returns. Also, you must have an adjusted gross income of not more than $73,000 if you are married; $54,750, if you are the head of the household; and $36,500 if you are a single person or a married person filing as a single person (divorced, or widow/widower). 

The credit is worth up to $1000 for single filers and $2000 for married couples who want to file jointly. You can apply to a 401(k), 403(b), or similar employer-sponsored retirement plan, or even a traditional or Roth IRA and ABLE account. According to the TCRS survey, the average amount of the saver's credit was around $186 back in 2020.



 

It's the adjusted gross income which you can find on line 11 of your 1040 form. As the AGI rises, the tax credit slowly gets removed. 

You can use the IRS online tool to help determine your eligibility for the credit. Once that's done, you can then use the online tax preparation tool to prepare for your tax return including those offered through the IRD Free File program. For this, you may be asked to answer questions about their saver's credit. If you are somebody who prepares your tax return manually, you can simply fill up 8880 to determine your credit rate and amount. If you get the return successfully, you can then deposit this amount into an IRA to boost your retirement savings further. 

Source: GettyImages | Joe Raedle  Staff
U.S> Individual Income Tax Return form | Getty Images | Joe Raedle Staff

In 2027, the SECURE Act 2.0, which was implemented in 2022, will replace the credit with the saver's match which is a contribution from the government for the retirement savers meeting the income eligibility requirements. It's said to be around 50% of a worker's retirement plan or IRA contributions up to $2000, which means a match of $1000.  All in all, you need to be someone who contributed to a retirement plan, and then all you have to do is fill up the 8880 to determine your exact credit rate and amount. It was reported by many that most people are unaware of the saver's credit so, if you are an employer, then you can take steps to inform your employees.

MORE ON MARKET REALIST
The student also began flashing the cash to her closest friends and began drinking expensive whisky with them.
2 days ago
The TikTok content creator and her friend guessed that the price would be higher than average but still got it wrong.
2 days ago
Costco has introduced the measures along with the first increase in its membership fees since 2017.
4 days ago
The Maserati driving kid has shared several videos on TikTok showing off her money collections.
Oct 2, 2024
There are several reasons why it only costs $10,000 to open a Chick-fil-A location. Keep reading to learn about all the details.
Sep 29, 2024
Here are three key learnings from the radio host, bestselling author, and personal finance expert's money secrets.
Sep 26, 2024
Buying a car is a major financial investment and that's why you should know how to negotiate a car loan before you go to the dealership.
Sep 23, 2024
If you've invested in rental property, you should consider multiple factors when deciding whether it's the best time to sell.
Sep 22, 2024
The real estate market may have cooled a little, but if you received a text message asking to buy your house, you may want to investigate.
Sep 21, 2024
The man dressed in a cartoon costume during the cheque presentation ceremony to protect his identity.
Sep 20, 2024
You can block fraudsters from using your child’s SSN and other personal information by freezing their credit file.
Sep 20, 2024
An obvious perk of having a home with a driveway is the extra space. If you want to make some extra cash, here's how to rent out your driveway.
Sep 19, 2024
TikTok creator Lindsay wasn't happy with Cuban asking the working class to cut down on happiness.
Sep 17, 2024
The bill with a printing error could multiply in value if it grabs collectors' attention.
Sep 17, 2024
While some celebrities are infamous for being stingy, Derulo is known to be a generous tipper.
Sep 16, 2024
"They say money can't buy happiness, but Maybank knows how to buy frustration," she said.
Sep 14, 2024
While there could be millions of such pairs out there, only nine sets have been found so far.
Sep 14, 2024
Social media users suggest that this habit is a clear giveaway of someone's age.
Sep 13, 2024