Updated: Mar 15, 2024

How to Get the Saver's Credit (Tax Credit) When You Save for Retirement

Putting away money for retirement in your 20s should be a top priority and you can benefit even more by taking advantage of the tax saver's credit.
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For many people, taxes are not too complex.

Unless you buy a house or you travel a lot for your job, you're not going to be claiming a lot of deductions, aside from writing off the interest you're paying on your student loans.

While that means less paperwork at tax time, it also means more money you may have to pay to Uncle Sam.

One of the ways you can offset your taxes:

Look for every credit for which you may be eligible.

Unlike deductions, which lower your taxable income, credits reduce what you owe on a dollar-by-dollar basis.

One tax credit you might be eligible for is the Saver's Credit, which rewards those who put money towards their retirement.

The Saver's Credit

The Saver's Credit is designed to benefit lower-income workers who are making an effort to set aside money for retirement.

Unfortunately, only 23 percent of taxpayers who qualify for the credit are aware that it exists and even fewer actually claim it.


For those who are just starting out in their careers and/or aren't bringing in a lot of money yet, claiming the saver's credit should be a no-brainer.

If you're not sure whether you're eligible, here's a quick guide on how the credit works so you can get the most out of your tax filing.

Who Qualifies for the Tax Saver's Credit?

The IRS rules for claiming the credit are fairly simple.

You have to be 18 or older and you can't be claimed as a dependent on someone else's return.

If you're still enrolled in school full-time, you're not eligible.

Contributions to your 401(k), 403(b), SIMPLE IRA, traditional or Roth IRA all count for the purposes of claiming the credit.

If you're self-employed and have a SEP IRA, the credit is based only on the contributions you make as an employee.

Aside from these basic criteria, you also to be within certain income guidelines, which vary based on your filing status.

If you're a single 20-something, you qualify as long as your adjusted gross income (the amount you earn minus any deductions or exemptions) is less than $34,000.

If you're married, you can still get the credit as long as your joint earnings are not more than $68,000.

Calculating Its Worth

The credit's value is calculated based on the first $1,000 that you put into a qualified retirement plan.

You can get any of the following percentages of the contributed amount:

  • 50%
  • 20%
  • 10%

If you're married, it doubles to $2,000. The actual amount of the credit you can get depends on your income so it pays to know up front how much you'll benefit by saving the money.

For example, if you're single and you earned $20,501 or less last year, you'd qualify for a 50 percent credit on your contributions.

If you chipped in $1,000 or more, the credit would come up to $1,000.

On the other hand, if you earned more than $22,001 but less than $34,000, you'd only get a 10 percent credit, which would put its worth at $100 instead.

Tax Saver's Credit (2022)

Credit Rate Married Filing Jointly Head of Household Single, Married Filing Separately, or Qualifying Widower
0% of your contribution more than $68,000 more than $51,000 more than $34,000
10% of your contribution $44,001 – $68,000 $33,001 – $51,000 $22,001 – $34,000
20% of your contribution $41,001 – $44,000 $30,751 – $33,000 $20,501 – $22,000
50% of your contribution AGI of $41,000 or less AGI of $30,750 or less AGI of $20,500 or less

Keep in mind that you can't claim the tax saver's credit for any IRA contributions that you made as the result of a rollover.

If you end up taking money back out of your retirement account during the year, it can reduce how much of a credit you're eligible for.

Picking the Right Spot for Your Savings

If you want to cash in on the saver's credit but you haven't made any contributions to a retirement account yet, you'll want to review your options to make sure you pick the right one.

For most 20-somethings, an employer's 401(k) is the logical choice, especially if you're able to take advantage of matching contributions.

For 2022, you can save up to $20,500 of your pay in a 401(k).

If you don't have a 401(k) through your job, a traditional or Roth IRA is the next best thing.

You can put up to $6,000 in either one for the year and if you already qualify for the saver's credit, you should also be able to deduct your traditional IRA contributions.

Taking the deduction on top of the credit can shrink your tax bill or grow your refund even more.

Timing Counts for Contributions

If this is your first time filing taxes on your own, you'll have to decide which tax year you want to try and claim the credit for.

While December 31st is the cutoff for contributions to 401(k) or similar employer plan, you still have until the April 15th filing deadline to fund a traditional or Roth IRA.

Traditional IRA Vs. Roth IRA

Traditional IRA Roth IRA
Contributions may be tax-deductible. Contributions are not tax-deductible.
Pay taxes upon withdrawal. Earnings can be withdrawn tax-free and without penalties if the funds were in the Roth IRA for 5 years and you've reached age 59 1/2.
You must be under age 70 1/2 to contribute. You can contribute at any age.
Required minimum distributions (RMDs) are required starting at age 70 1/2. No RMDs required.

If you're thinking of opening an IRA, you've got a few months to tackle that goal.

As long as you're designating your contributions correctly, you can claim the saver's credit for the 2022 tax year, while setting aside money towards the 2023 contribution limit.

You can also continue saving through your employer's plan, although whether or not you'll be able to deduct your traditional IRA contributions depends on how much you earn.

Final Word

When it comes to your taxes, every penny counts and it's easy for 20-somethings to overlook valuable credits and deductions.

If you've been telling yourself that you can't afford to work on building your nest egg yet, being able to claim the tax saver's credit is an excellent incentive to get you started.