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IRS Form 8880 Can Save You $1,000 if You're Saving for Retirement

By Selena Maranjian - Oct 8, 2015 at 8:04AM

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Want some extra money? Form 8880 can help you claim the Saver's Credit, which is worth up to $1,000 for single people and $2,000 for married couples.

Form 8880 is your ticket to a potentially large tax credit. Photo: via Flickr.

This article was originally published on Oct. 8, 2015. It was updated on March 9, 2016.

At tax time, it can seem that all the government does is take, take, take. But it also gives a little back, too, through tax credits. The so-called Saver's Credit is a perfect example, offering a tax credit of up to $1,000 per person for those saving for retirement -- and all you need to claim it is IRS Form 8880.

Deductions are great, as they reduce your taxable income, but credits are even better. For example, if you deduct $1,000 from your taxable income and your tax rate is 25%, you'll avoid paying $250 in taxes. If you have a $1,000 credit, though, it's worth exactly $1,000; you pay $1,000 less in taxes.

Nuts and bolts
That example was not just hypothetical: Form 8880 can grant you a $1,000 tax credit if you qualify. Let's take a closer look at it. The full name of the credit is the Retirement Savings Contributions Credit, though it's often referred to as the Saver's Credit. It was created as a temporary measure in 2002 and then made permanent in 2006.

The credit is aimed at low-income taxpayers and is designed to encourage them to save for retirement. If you're not earning much, then saving for retirement can be difficult. However, it's absolutely vital, as Social Security is not likely to provide as much income as you'll need. The credit offers you up to 50% of the first $2,000 you contribute to a traditional or Roth IRA or other qualifying retirement plan, such as a 401(k), 403(b), or 457 plan. Those who fully qualify get that 50%. Those who earn a little too much to qualify for the 50% credit can still qualify for a partial credit of 10% or 20% of their contribution, up to $2,000.

The table below shows the adjusted gross income (AGI) limits associated with the 50%, 20%, and 10% credits for the 2015 tax year. Note that to qualify you must also be at least 18 years old and not claimed as a dependent on anyone's tax return, and you cannot have been a full-time college student during that tax year.

2015 Saver's Credit

The Percentage of Your Contribution You Get as a Credit

Single, Married Filing Separately, or Qualifying Widow(er)

Head of Household

Married Filing Jointly


AGI not more than $18,250

AGI not more than $27,375

AGI not more than $36,500










More than $30,500

More than $45,750

More than $61,000


Here's the same table, updated for 2016:

2016 Saver's Credit

The Percentage of Your Contribution You Get as a Credit

Single, Married Filing Separately, or Qualifying Widow(er)

Head of Household

Married Filing Jointly


AGI not more than $18,500

AGI not more than $27,750

AGI not more than $37,000










More than $30,750

More than $46,125

More than $61,500


Remember that the credit is per person, so a couple can collect as much as $2,000, or $1,000 each. Don't disregard the credit if you're only eligible for a 10% credit. If you can sock away $2,000, you'll get to enjoy an extra $200.

Your deadline for making contributions is Dec. 31 of the tax year for contributions to 401(k)s and workplace plans and April 15 (or the regular tax-filing deadline) for IRAs. So as you work to complete your tax return in March or April, it may not be too late to earn the Saver's Credit. Fill out Form 8880 and include it with the tax return that you send to the IRS. (You can use Form 8880 with the regular 1040 tax form, the 1040A, and the 1040NR, but not with the 1040EZ.)

Form 8880 can help you save all the money you're entitled to. Photo: Flickr user kev-shine.

A good strategy
If you qualify for the Saver's Credit but are on financially shaky ground and worried that you might need the $2,000 you socked away to claim the credit, then consider making your qualifying contribution to a Roth IRA. Because a Roth IRA is funded with post-tax money, you're allowed to withdraw your contributions (but not your earnings) at any time without paying tax or penalties. So if you've contributed a total of $8,000 to your account over the years and there's now $12,000 in it, you can only withdraw the $8,000 early. The rest will be available to you tax-free once you turn 59-1/2 and once the account has been open for at least five years.

Note that some retirement plans, such as 401(k)s, often offer employer matches. If that's the case for you, that's even more free money to take advantage of.

One last thing to keep in mind is that the Saver's Credit is a "nonrefundable" credit, so while it can reduce your taxes owed substantially -- perhaps even to zero -- it doesn't go further than that. If your tax bill is $700 and you qualify for a $1,000 credit, you'll only use $700 of the credit. (Some credits are "refundable," meaning that in the preceding example, you would get a tax refund of $300.) The point here is that if you owe little to nothing in taxes, you won't get to enjoy the full value of the credit.

The Saver's Credit is essentially free money (and potentially a lot of it) offered to entice low-income taxpayers to save for retirement. You may not qualify to use Form 8880 to claim the credit, but if you do, it can save you a lot of money at tax time.

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