Low- and moderate-income workers who save for retirement in a 401(k) plan or individual retirement account could qualify for the saver’s credit. This retirement savings contributions credit can be claimed in addition to any tax deduction you earn by contributing to a traditional retirement account.
Here’s how to qualify for the saver’s credit on your 2019 tax return:
- Check the saver’s credit income requirements.
- Save in a qualifying retirement account, such as a 401(k) or IRA.
- Contribute enough for the full credit.
- Meet the saver’s credit contribution deadline.
Find out if you are eligible for the saver’s credit and what you need to do to claim the saver’s credit in 2019.
Check the Saver’s Credit Income Requirements
Individuals with an adjusted gross income of up to $32,000 in 2019 could qualify for the saver’s credit if they contribute to a retirement account. “If you’re single and earning $20,000, people in that income level have a hard time saving for retirement,” says Gil Charney, director of The Tax Institute at H&R Block. “It’s difficult pragmatically to be able to make these kinds of savings decisions, but if you can, it is a very good deal.” Heads of household have a higher saver’s credit income threshold of $48,000 in 2019. Married couples can earn as much as $64,000 in 2019 and remain eligible for the saver’s credit.
Contribute to a Saver’s Credit Qualifying Retirement Account
There are several types of retirement accounts that might qualify you for the saver’s credit. Contributing to a 401(k) plan will often allow you to claim the saver’s credit. Other types of eligible workplace retirement accounts include 403(b) plans for employees of public schools, 457 plans for state or local government employees, SEP or SIMPLE plans, which are sometimes used by smaller employers, and the federal government’s Thrift Savings Plan. But you don’t necessarily need a workplace retirement account to qualify for the credit. Contributions to a traditional IRA, Roth IRA or ABLE account of which you are the designated beneficiary could also make you eligible for the saver’s credit.
Save Enough to Qualify for the Full Saver’s Credit
The saver’s credit can be claimed on retirement account contributions of up to $2,000 for individuals and $4,000 for couples. However, distributions from your retirement account might reduce the amount that is used to calculate the credit.
Meet the Saver’s Credit Contribution Deadline
Contributions to 401(k) plans and similar types of workplace retirement accounts that might qualify for the saver’s credit are typically due by the end of the calendar year. However, you have until the due date of your tax return in April to make an IRA contribution that counts toward the saver’s credit. So retirement savers have until April 15, 2020, to make a traditional IRA or Roth IRA contribution that makes them eligible for the saver’s credit on…
Read More: How to Claim the Saver’s Credit | IRAs