If you've been brushing off saving for retirement, here's one incentive that could inspire you to step up your retirement game: the Saver's Credit. It's a special reward that the IRS grants to low- and moderate-income individuals who save for retirement. 

Not only do you have the opportunity to stash away money for your golden years, but you may also be eligible for a tax credit up to $1,000 or $2,000 when you file your tax returns

Young woman holding her pink piggy bank.

Image source: Getty Images.

The saver's secret 

Most people who qualify for the Saver's Credit have no idea that it exists. According to the Transamerica Center for Retirement Studies, 62% of Americans aren't aware of the tax savings that the Saver's Credit could give them on their tax returns. It's one of the best-kept retirement savings secrets that could reduce your federal taxes and leave more cash in your pockets.

If you're 18 or older, and not a full-time student or a dependent on another person's tax return, you can unlock the power of the Saver's Credit. It's an incentive designed to help individuals boost their retirement savings. 

Tap into the Saver's Credit 

Savvy taxpayers are on the lookout for as many credits as they can get their hands on. The Retirement Savings Contributions Credit -- a dollar-for-dollar reduction on the income taxes you owe now -- is a great way to earn a benefit today while you plan to live your best life later. The Saver's Credit, however, is a nonrefundable credit, which means the credit won't reduce your total tax bill below zero. 

Eligible individuals who make retirement contributions may qualify for one of three credit rates: 50%, 20%, or 10%. The rate you qualify for depends on your income earned, filing status, and the qualifying contributions made. To claim this credit, your income must not exceed certain thresholds. Your adjusted gross income (AGI) is the magic number that will determine if you qualify for the Saver's Credit.

A single person can claim a maximum credit of up to $1,000. If you're single with AGI less than $19,750, you qualify for a credit worth 50% of your contribution. Let's say you contribute $1,500 to a qualified retirement savings plan. Your 50% credit will translate into a $750 reduction in the taxes you owe. If you're married, you'll get a boost in benefits, allowing you to claim a maximum credit of up to $2,000.

Although you can only receive a maximum credit of $1,000 (single filer) or $2,000 (filing jointly), you can always contribute the maximum amount to your retirement account. Take a look at the Saver's Credit table below for the 2021 tax year to determine what you qualify for. 


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.

Retirement account contributions for the credit

The IRS allows you to contribute money to an IRA, ABLE account, or qualified employer retirement plan to capitalize on the Saver's Credit. In fact, you may already be stashing money away for retirement and not getting the benefit of the Saver's Credit every year. 

Here are some of the most popular types of contributions that could lower your tax bill through the Saver's Credit: 

When filing your tax returns, make sure you complete Form 8880 (Credit for Qualified Retirement Savings Contributions) to claim the credit. 

Don't let a good credit pass you by 

Credits don't last forever, so if you qualify, take advantage of the opportunity to claim free money for saving toward retirement.

This credit can make a big difference in your tax savings over the long term. Imagine that you are filing as a married couple and you made a total of $100,000 in contributions over 25 years. That could give you $50,000 in credits! This is a true bonus because what this really means is that the couple has effectively contributed only $50,000 to their retirement savings, receiving the rest as a reward for saving.