Contributing to a Roth IRA? Earn Up to $2,000 With the 2024 Saver's Credit

The Roth IRA is one of the most coveted retirement accounts in existence, and for good reason. Some well-known perks of contributing to a Roth IRA include tax-free growth and tax-free withdrawals during retirement. However, more than half of U.S. workers are unaware of a significant benefit that can help you during tax time: the Saver's Credit. If you qualify for this credit in 2024, it could reduce or even completely eliminate your tax bill if you end up owing money at the end of the year.

Here's a rundown of a few things you need to know about the Saver's Credit to get you even more excited about contributing to a Roth IRA in 2024.

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A few things to know about the Saver's Credit

If you're looking for a way to save on your tax bill this year, you should look into the Saver's Credit. Also known as the Retirement Savings Contribution Credit, this nonrefundable tax credit is available to low- and moderate-income taxpayers who contribute to a qualified retirement account, such as a Roth IRA. If you are married filing jointly, you could receive a credit worth up to $2,000, while single filers can receive up to $1,000.

For example, let's say you are a freelancer and didn't pay taxes during the year. When you file your taxes, you end up with an $800 tax bill. If you are a single tax filer, contribute to a Roth IRA, and qualify for a $900 Saver's Credit, the credit would wipe out your tax liability. However, since the Saver's Credit is nonrefundable, you won't get to pocket the extra $100 that is left over after your tax bill is paid.

Tax credits are highly sought after on tax returns because they provide a dollar-for-dollar reduction in tax liability. However, you won't be eligible for the Saver's Credit unless you meet the following requirements:

• Contribute to a qualified retirement plan.
• Are 18 or older.
• Are not claimed as a dependent on someone else's tax return.
• Are not a full-time student.
• Meet the income threshold for your filing status.

Find out if you can claim the 2024 Saver's Credit

Your adjusted gross income (AGI) and filing status will determine if you are eligible for the Saver's Credit and how much your credit might be. It could be worth 50%, 20%, or 10% of your contributions.

For example, let's say you are a 35-year-old single filer, contribute $1,000 to a Roth IRA, and have an AGI of $22,000 in 2024. You would qualify for the 50% credit of $500 for your $1,000 contribution on your 2024 tax return. If you contributed $2,000 to a Roth IRA, you would qualify for the maximum credit of $1,000 for single filers. However, you won't qualify for the Saver's Credit if your AGI exceeds $38,250 as a single filer, $57,375 as a head of household filer, and $76,500 if you are married filing jointly.

Take a look at the table below to see where your income lands and if you may be eligible for the 2024 Saver's Credit.