Filing taxes can be a stressful time for many Americans, but knowing about potential bonuses and credits can help ease the burden. One such bonus is the Saver’s Credit, which can help reduce a person’s federal tax bill. This credit is available to individuals who contribute to their IRA or employer-sponsored retirement plan, as well as to ABLE accounts, if they meet certain criteria. However, many Americans are unaware of this credit, with over half of workers being unaware of its existence.
The Saver’s Credit can potentially reduce a person’s tax bill by up to $1,000 for individuals ($2,000 for married couples filing jointly), depending on their contributions. This credit is in addition to other tax advantages of saving for retirement in a 401(k), 403(b), or IRA. Congress recently enhanced the Saver’s Credit through the SECURE 2.0 law, aiming to increase the savings of lower-income workers. One provision of this law involves changing the current Saver’s Credit to a match, where the federal government would make a matching contribution to a qualified retirement plan of lower-income workers, up to $1,000 annually.
It is important for individuals to be aware of the various tax incentives available to them when it comes to saving for retirement. By taking advantage of these incentives, individuals can potentially save money on their taxes while also contributing to their future financial security. The Saver’s Credit is just one example of a tax benefit that many Americans may be missing out on. By understanding the criteria and requirements for this credit, individuals can ensure they are maximizing their savings opportunities.
In order to qualify for the Saver’s Credit, individuals must meet certain criteria, including being age 18 or older, not being claimed as a dependent on another person’s return, and not being a student. By contributing to their retirement savings accounts and meeting these criteria, individuals can potentially qualify for this tax credit. It is important for individuals to be proactive in their retirement savings efforts and to take advantage of the various tax incentives available to them.
While the enhanced Saver’s Credit with the match provision is scheduled to go into effect in 2027, individuals should not wait to start saving for retirement. By contributing to an IRA or Roth IRA and maxing out their employer-sponsored retirement plans, individuals can start building their savings for the future. The Saver’s Credit is a valuable tool that can help individuals reduce their tax bill while also contributing to their long-term financial goals. By understanding the rules and requirements for this credit, individuals can ensure they are taking full advantage of the benefits available to them.
