An individual may be able to take a tax credit of up to $1,000 ($2,000 if filing jointly) for making eligible contributions to an IRA or employer-sponsored retirement plan.

Who is eligible for the credit?

The individual claiming the credit must be:

  1. Age 18 or older;
  2. Not a full-time student;
  3. Not claimed as a dependent on another person’s return; and
  4. With an adjusted gross income not more than:

    • $56,500 if your filing status is married filing jointly (for 2011; $57,500 for 2012),
    • $42,375 if your filing status is head of household (for 2011; $43,125 for 2012), or
    • $28,250 if your filing status is single, married filing separately, or qualifying widow(er) (for 2011; $28,750 for 2012).

Retirement plan contributions eligible for the credit

Eligible contributions include:

  1. Contributions to a traditional or Roth IRA,
  2. Elective deferrals (including after-tax Roth contributions, if available) to a:

    • 401(k) plan (including a SIMPLE 401(k) and the federal Thrift Savings Plan),
    • SIMPLE IRA plan
    • SARSEP
    • 403(b) annuity
    • governmental 457(b) plan

  3. Contributions to a §501(c)(18) plan, and
  4. Voluntary after-tax employee contributions to a qualified retirement plan or 403(b) annuity. For purposes of the credit, employee contributions will be voluntary as long as they aren’t required as a condition of employment.

Rollover contributions aren’t eligible for the Saver’s Credit. Also, your eligible contributions may be reduced by any recent distributions you received from a retirement plan or IRA.

Amount of the credit

The amount of the credit you can get is based on the contributions you make and your credit rate. Your credit rate can be as low as 10% or as high as 50%. Your credit rate depends on your income and your filing status.

Example: Jill, who works at a retail store, is married and earned $30,000 in 2011. Jill’s husband was unemployed in 2011 and did not have any earnings. Jill contributed $1,000 to her IRA in 2011. After deducting her IRA contribution, the adjusted gross income shown on her joint return is $29,000. Jill may claim a 50% credit, $500, for her $1,000 IRA contribution.

Retirement Savings Contributions Credit (Saver’s Credit)

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