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This Secret Saver's Tax Credit Gets More Attractive in 2021

By Charlene Rhinehart, CPA – Updated Nov 4, 2020 at 5:01PM

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Find out if you qualify for this retirement savings secret that's been around since 2002.

If you can't take advantage of all the glamorous tax breaks that the top 1% receive, don't sweat it. There are tax perks for everyone -- including the Saver's Credit for low- and moderate-income individuals. This hidden gem can put up to $1,000 or $2,000 back in your pockets in 2021. 

The saver's secret is out

Saving for retirement is a distant dream for many. That's why the IRS is rewarding individuals who save money in a qualified employer retirement plan, IRA, or ABLE account by offering the Retirement Savings Contributions Credit -- a dollar-for-dollar reduction on the income taxes you owe now as you save toward financial freedom in your golden years. Your adjusted gross income (AGI) will determine if you can unlock the saver's credit during the 2021 tax year -- the one for which your return is due by April 2022. 

A man on a couch celebrates as money flies through the air around him.

Image source: Getty Images.

Great news -- the 2021 income limits have increased for the Saver's Credit! That means more people may be eligible for the credit. If you're married filing jointly, your AGI must be $66,000 or less (up from $65,000 in 2020); head of household filers with AGI of $49,500 or less (up from $48,750 in 2020); and all other filers with AGI of $33,000 or less (up from $32,500 in 2020).

You may already be contributing to a qualified retirement savings account and not receiving credit for it. Here's a list of some of the most common types of contributions that qualify for the Saver's Credit:

Take credit where credit is due 

Credits are the holy grail of the tax return -- the more credits you receive, the less taxes you owe. Some credits are refundable, allowing you to walk away with a tax refund if your credits exceed the taxes you owe. The Saver's Credit, however, is a nonrefundable credit, which means it can only reduce your tax bill to zero. 

Taxpayers are eligible for a 50%, 20%, or 10% credit rate for retirement account contributions based on the qualifying contributions made, filing status, and income earned. A single person can make a maximum contribution amount up to $2,000, and a married couple filing jointly can make up to $4,000 in eligible contributions. You can always contribute more to your retirement accounts (up to the absolute maximum contribution limits), but the maximum credit you can qualify for on your tax returns is $1,000 (single filers) or $2,000 (married filing jointly filers). 

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.

Now you know

Don't let a good credit go to waste. The Saver's Credit is a valuable government incentive that the majority of U.S. taxpayers (62%) are clueless about, according to the Transamerica Center for Retirement Studies. Anyone 18 or older who is not a full-time student, or dependent on another person's tax return, can claim the credit. 

If you qualify, start stashing some extra cash away in a retirement account and get rewarded for investing in your favorite companies. The big secret that makes the Saver's Credit so attractive is the long-term benefits -- a $2,000 annual credit for a married couple that makes total contributions of $180,000 over three decades can translate into over $60,000 in credits! That means a couple effectively contributed $120,000 to their retirement accounts, receiving thousands of dollars in free money from the government to live their best life later! 

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