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71% of Women Are Missing Out on This Tax Benefit

By Kailey Hagen - Nov 26, 2019 at 9:30AM

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Why not lower your tax bill and prepare for your future at the same time?

The end of the year is almost upon us, and that means the deadline for 2019 contributions to employer-sponsored retirement plans is nearly here. Setting aside money for your future can help ensure a comfortable retirement, but it can also have more immediate benefits. If you contribute to a tax-deferred retirement account, you'll reduce your taxable income for the year, so you'll owe taxes on less money. You might be able to slash your tax bill even further if you qualify for the Saver's Tax Credit, which I'll explain below.

Too often, this tax credit goes unclaimed, especially by women, in part because they aren't aware of it. A recent Transamerica survey found that 71% of women were unaware of the Saver's Tax Credit, compared to just 54% of men. Women already struggle more than men to save enough for their future, so they can't afford to overlook opportunities like this that help them save more for retirement. Here's how you can take advantage of the Saver's Tax Credit this year.

Smiling woman with money raining down upon her

Image source: Getty Images.

How the Saver's Tax Credit works

As the name implies, the Saver's Tax Credit is a tax credit, not a tax deduction. Deductions reduce your taxable income for the year -- the amount that you owe taxes on -- while credits are a dollar-for-dollar reduction of your tax bill. So, if you qualify for a $1,000 tax credit, you'll reduce your tax bill by $1,000.

The Saver's Tax Credit incentivizes low-income households to save for retirement by giving them a tax credit on up to $4,000 in retirement contributions for married couples filing jointly, or $2,000 for all other tax-filing statuses. It's only available to adults 18 or older who are not full-time students and not listed as dependents on anyone else's tax returns.

The amount you'll get depends on how much you contribute to your retirement account, your tax filing status, and your adjusted gross income (AGI), which is your income minus certain tax deductions. The following chart breaks down the Saver's Tax Credit rates for 2019 that you may qualify for based on AGI and tax-filing status.

2019 Saver's Tax Credit income ranges based on tax-filing status

Credit Rate

Married Filing Jointly

Head of Household

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


AGI of $38,500 or less

AGI of $28,875 or less

AGI of $19,250 or less


$38,501 to $41,500

$28,876 to $31,125

$19,251 to $20,750


$41,501 to $64,000

$31,126 to $48,000

$20,751 to $32,000


More than $64,000

More than $48,000

More than $32,000

Data source: IRS.

Examples make this easier to understand, so let's consider a single filer with an AGI of $19,000 in 2019. This makes them eligible for a 50% Saver's Tax Credit rate on their retirement contributions. If they contribute $1,000 to their retirement account, they'll get a $500 tax credit ($1,000 x 50% = $500). If they contribute $2,000 instead, then their tax credit would be $1,000. They could contribute even more to their retirement account if they chose -- say, $3,000 -- but remember, the Saver's Tax Credit only considers the first $2,000 you contribute to your retirement account, or $4,000 for married couples filing jointly, so the largest tax credit you could receive is $1,000, or $2,000 for married couples filing jointly.

As your income increases, your Saver's Tax Credit decreases until, finally, if your AGI exceeds $64,000 for married couples filing jointly, $48,000 for heads of household, or $32,000 for all other filing statuses, you're no longer eligible for the Saver's Tax Credit at all. But you'll still get a tax deduction for the year if you put money into a tax-deferred retirement account. Low-income households who are able to claim the Saver's Tax Credit will still get these deductions as well.

Try to make a retirement contribution this year

It's difficult for many people, especially women, to save enough for retirement when they're also trying to cover their basic expenses and save for their other goals. But the Saver's Tax Credit should incentivize many to do so, even if it means making some changes to their budgets.

Try to increase the amount of each paycheck you defer toward retirement if you can, or start deferring money toward retirement if you're not already. Look for ways to reduce your expenses, like cutting back on discretionary purchases, if you need to free up more cash. You could also work overtime or start a side hustle to get more money coming in. Put that extra savings toward retirement first.

It doesn't hurt to contribute even more than the $2,000 (or $4,000 for married couples filing jointly) that count for the Saver's Tax Credit. You'll still get a tax deduction, and it'll help you enjoy a more comfortable retirement later. Just stay mindful of the contribution limits, because exceeding them will cost you penalties. You're allowed to contribute up to $19,000 to a 401(k) in 2019 or $25,000 if you're 50 or older. You may also contribute up to $6,000 to an IRA, or $7,000 if you're 50 or older.

You can make IRA contributions for 2019 any time between now and the 2019 tax filing deadline, but you must make contributions to employer-sponsored retirement plans before the end of the year if you want them to count for 2019. If you can spare a little extra cash, and you think you might qualify for the Saver's Tax Credit, make your contributions by the deadline so you can reap the rewards of a larger tax refund this year and a larger nest egg in retirement.

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