Retirement Savings Contribution Credit

The retirement savings contribution tax credit is a nonrefundable credit that is limited to the applicable percentage—10%, 20% or 50%, depending on the taxpayer’s AGI and filing status—of eligible retirement savings contributions not exceeding $2,000 per taxpayer. Thus, the maximum saver’s credit is $1,000 per taxpayer (up to $2,000 for a taxpayer and spouse). The credit does not affect the tax treatment to which the retirement savings contribution would normally be subject; for example, a normally deductible contribution would still be deductible.

The retirement plan contributions eligible for the credit are contributions to traditional and Roth individual retirement arrangements (IRAs) and elective deferrals to a) 401(k) plans, b) 403(b) tax sheltered annuity plans, c) Section 457 governmental plans, d) SIMPLE IRAs and e) salary reduction SEPs (SARSEPs). The credit is affected by the taxpayer’s AGI and filing status, and taxpayers whose AGI is not in excess of $76,500 (joint returns), $57,375 (head of household returns) or $38,250 (all other statuses) may be eligible for the credit.