If you've ever been on the fence about contributing to a retirement account, this incentive may cause you to have a change of heart: the Saver's Credit. It's also known as the Retirement Savings Contribution Credit, and it's possibly one of the most underutilized tax benefits among low- and moderate-income taxpayers. 

In a nutshell, the Saver's Credit gives you a chance to earn up to $1,000 (up to $2,000 for a married couple) just for contributing to a qualified retirement plan. That extra money -- although nonrefundable -- could potentially wipe out or reduce your tax bill. 

It may sound too good to be true, but the Saver's Credit has been around for almost a decade and has allowed many people to earn a tax break while boosting their retirement savings. However, most people have no idea they qualify. I'll break down the qualifications below to ensure you won't leave another penny on the table. 

Excited person holding dollar bills in hand.

Image source: Getty Images.

A glimpse into the Saver's Credit

The Saver's Credit was designed to encourage more people to save for retirement. The harsh reality is that many Americans don't take retirement planning seriously until it's too late. Now, the COVID-19 crisis has added another layer of concern. A Retirement Confidence survey reveals that 40% of Americans are scared they won't be able to retire because of financial hardships suffered during the pandemic. 

Although saving for retirement may be a low priority when you have bills to pay, it can actually work in your favor when you file your tax return.

Let's say you're a single taxpayer and you're hit with an $800 tax bill. If you have a Saver's Credit worth $1,000, your entire tax bill is taken care of and you no longer owe anything to the IRS.

However, the extra $200 that wasn't used toward your bill won't be put into your pockets because this is a non-refundable tax credit. In other words, the Saver's Credit won't leave you with a tax refund; it's there to help you cover your tax bill. 

Do you meet the income qualifications? 

Your adjusted gross income (AGI) will determine if you can tap into the 2021 Saver's Credit perks. We'll also have to look at your filing status and retirement account contributions to determine your credit amount. 

When it comes to the Saver's Credit, there are three credit buckets you can fall into: 50%, 20%, or 10%. Using the eligibility chart below, I'll run through how it works. 

Let's say you are a single person with an AGI of $19,000. You decide to contribute $2,500 to your Roth IRA (individual retirement account). The maximum contribution amount that the IRS will consider for credit purposes is $2,000. Because the income falls within the range for the "50% of your contribution" credit, the taxpayer is entitled to a $1,000 Saver's Credit. A married couple can make up to $4,000 in eligible contributions that can lead to up to a $2,000 credit.

2021 Saver's Credit rate and AGI eligibility by filing status


Married Filing Jointly 


Head of Household 


All Other Filers 


50% of your contribution 

$0 to $39,500

$0 to $29,625

$0 to $19,750

20% of your contribution 

$39,501 to $43,000

$29,626 to $32,250

$19,751 to $21,500

10% of your contribution

$43,001 to $66,000

$32,251 to $49,500

$21,501 to $33,000

Not available 

Over $66,000

Over $49,500

Over $33,000

Data source: IRS.

Make the most of these retirement accounts 

We mentioned the Roth IRA in our example above, but that's not the only account that allows you to get your hands on the Saver's Credit. If you plan to make contributions to the retirement accounts below, you're another step closer to a tax break.

Claim your reward 

Credits are a bonus in the tax world. Unlike deductions, a tax credit allows you to lower your tax bill dollar-for-dollar. If you ever have a chance to take advantage of benefits like the Saver's Credit, that's an automatic slam dunk on your tax return. 

Anyone 18 or older who is not classified as a dependent on another person's tax return or a full-time student can tap into the power of the Saver's Credit. Those tax savings really add up, leading to thousands of dollars in rewards from the government just for taking the initiative to build a retirement nest egg now.