The Saver's Credit for Retirement Savings

1What does the credit pay for?

The credit is a percentage of the first $2,000 you contribute to retirement savings in the year, or $2,000 for each spouse on a joint return. The percentage, 50, 20 or 10, depends on your adjusted gross income and filing status: the lower the income, the higher the rate. The largest credit is $1,000 per person, or $2,000 for a couple who each contribute $2,000 at the 50 percent rate.

It comes on top of any deduction for the same contribution. A traditional IRA or pre-tax 401(k) contribution lowers your taxable income, and the same dollars can earn the credit as well. On a joint return each spouse can earn it on contributions to their own account, including a spousal IRA for a spouse who does not work.

2Do you qualify?

You must be at least 18 at the end of the year, not a full-time student during any part of five calendar months of the year, and not claimed as a dependent on someone else's return. Then your adjusted gross income decides the rate:

Swipe sideways to see the whole table.

Notice how narrow the 20 percent band is: for a married couple, $4,000 of income separates a 50 percent credit from a 10 percent one. Because the limits are on adjusted gross income, a pre-tax contribution that lowers your income can move you into a higher rate.

3What about students, young workers and retirees?

Students are excluded only if they were full-time for some part of five calendar months; a part-time student who works can qualify. Young workers must be 18 by the end of the year and not claimed as anyone's dependent, so a teenager with a summer job and a Roth IRA set up by a parent usually cannot claim it, even though the savings are worth making.

Retirees have no upper age limit. A 70-year-old who still works part time and puts money into an IRA can qualify, but withdrawals in the testing period, including required minimum distributions, reduce the contributions that count, often to nothing. The credit tends to help people still building savings, not people drawing them down.

4Which savings count?

• Traditional and Roth IRAs, including contributions made for the year up to the filing deadline the next spring.
• Your own contributions to a 401(k), 403(b), governmental 457(b), SIMPLE IRA or SEP plan.
• Contributions to an ABLE account by its designated beneficiary.

Employer matching contributions do not count; only what you put in. For 2026 the IRA contribution limit is $7,500 and the 401(k) employee limit is $24,500, though the credit counts only the first $2,000.

5How much will it be worth to you?

Less than the table suggests, for many people, because the credit is nonrefundable: it can reduce your income tax to zero, but it cannot pay you more than the tax you owe. A single worker with adjusted gross income of $22,000 who puts $2,000 into a Roth IRA qualifies for the 50 percent rate, a $1,000 credit. After the $16,100 standard deduction, though, the worker's income tax is only about $590, so that is what the credit is worth, wiping the tax out.

If you are near a line at the end of the year, a deductible traditional IRA contribution, which can be made until the filing deadline, is the one move still available after you know your income. At these incomes it is usually deductible, even with a workplace plan.

6Do withdrawals cancel it out?

They can. Distributions from retirement accounts taken during a testing period, which covers the tax year, the two years before it and the time up to the filing deadline, reduce the contributions you can use, for you and, on a joint return, your spouse. Rollovers and some other transfers do not count as withdrawals. If you expect to need the money soon, the credit may be smaller than it looks.

7How do you claim it?

Complete Form 8880 and attach it to your Form 1040. Tax software asks about it, but only if you enter your contributions, so have your year-end 401(k) statement or Form W-2, where box 12 shows what you deferred, and your IRA contribution records at hand. Free preparers at Volunteer Income Tax Assistance sites can also help. If you missed the credit in a past year, you can generally amend that year's return within three years; see our guide to unclaimed tax refunds.

8What if you have no retirement account yet?

If your employer offers a plan, ask how to enroll; even a small contribution counts. Without a workplace plan, you can open an IRA at a bank, credit union or brokerage, often with no minimum. A growing number of states run automatic IRA programs for workers whose employers offer no plan, deducting a small share of each paycheck into a Roth IRA unless the worker opts out; contributions to these count for the credit too.

9Could saving affect your other benefits?

Saving for retirement can affect means-tested programs. SNAP generally does not count retirement accounts at all. SSI, however, generally counts money you could withdraw from an IRA or similar account, after any penalty, toward its $2,000 resource limit, so check before saving if you receive or may apply for SSI; our guide to SSI income and resource limits explains the rules. ABLE accounts, available from 2026 to people whose disability began before 46, are a way to save that SSI largely ignores, and contributions to them count for the credit.

10What happens in 2027?

Under the SECURE 2.0 Act of 2022, the Saver's Credit is scheduled to be replaced beginning in 2027 by a Saver's Match: a federal matching contribution of up to 50 percent of up to $2,000, deposited directly into your retirement account rather than reducing your tax. Because it will not depend on owing tax, it is expected to help lower-income savers like the single worker above. The IRS and the Treasury Department will set out how to claim it. Contributions made for 2026, including IRA contributions made by the 2027 filing deadline, are still eligible for the credit.

11Before you count on the credit

The credit depends on your adjusted gross income, filing status, tax owed and the contributions that count after withdrawals. This guide gives the rules, not a personal figure, and is not tax advice. Check IRS guidance on the Saver's Match for the year you file.