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How the Saver's Credit works

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Kateryna Onyshchuk/Getty Images/iStockphoto

Saving for retirement is often easier said than done—especially with so many other expenses on your plate. But as it turns out, it pays to make it a priority. If you're saving for retirement, you may be eligible for the Saver's Credit, which can reduce your tax bill. This effectively puts some of those savings back into your budget for the coming year. Here's how to know if you qualify.

What is the Saver's Credit?

The Saver's Credit—also known as the Retirement Savings Contribution Credit—was designed to make it easier to prioritize saving for retirement, even when your income is low or modest. With it, every dollar you contribute to a qualifying account means you receive a percentage back as a tax credit.

Tax reductions can be either deductions or credits. Deductions let you exclude some of your income from your taxable income. Credits can be more powerful because they're subtracted from your tax bill. For example, a $500 deduction might only save you $100 if you're taxed at a 20% rate. In contrast, a $500 tax credit cuts your tax bill by the full $500.

Who qualifies for the Saver's Credit?

To be eligible, you must be at least age 18, not a full-time student and not claimed as a dependent on someone else's tax return.

You also must be contributing to an account that qualifies. You may be eligible to take this credit if you've made contributions (other than rollover contributions) to a traditional or Roth IRAs or elective deferrals to 401(k)s403(b)s457(b)sSIMPLE IRAs and SEP IRAs or to the federal Thrift Savings Plan (TSP).

Finally, the credit has income limits: Your adjusted gross income (AGI) for the year must fall below the thresholds for you to qualify. The standards are different depending on whether you file taxes on your own, as a head of household or jointly with your spouse. Here are the Saver's Credit income limits for the 2023 tax year:

Contribution percentage credited
AGI limit for married filing jointly
AGI limit for head of household
AGI limit for other filing statuses




Not more than $43,500


Not more than $32,625


Not more than $21,750

















If you make more than the upper limits, you can't receive the credit. Also, if you owe less than the credit amount, your amount owed can only go down to $0; that is, it doesn't become a refund.

Tax credit benefits in action

Here's how this retirement savings credit could help you accomplish your financial goals without taking a big hit to your monthly budget.

Say Isabelle is working on launching her own nonprofit full-time but still only gains an AGI of $20,000 each year. This most likely means she has to live frugally to make ends meet. But perhaps she talks through her retirement savings contribution options with a financial advisor and decides she can manage $300 a year.

If she has a tax liability that year, she can expect $150 in tax credits. If she doesn't earmark this $150 for another expense, she might be able to raise her retirement contributions using that $150. She could then continue to receive 50% back as a tax credit in future years, creating a snowball effect of growing savings.

How to claim the Saver's Credit

If you have some tax liability and a low- to mid-level income and you save for retirement, you may want to take advantage of this tax credit. Start with Form 8880, Credit for Qualified Retirement Savings Contributions. As with other tax documents, you may be able to complete the form yourself if you do your own taxes. Or if you work with a tax professional, you can discuss your eligibility with them.

Saving for retirement wisely

The income eligibility requirements for the Saver's Credit mean that the people who can take advantage of it may not have much disposable income. However, using this credit, even at a low level, can keep your tax liability low enough that it's easier to save for retirement in coming years.

Thrivent financial advisor can help you think through how to use tax incentives to continue saving for retirement even when you need most of your income for monthly expenses. Saving early and sticking with it as much as possible can give you and your family confidence in your financial stability for the future.

Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.

Hypothetical examples are for illustrative purposes. May not be representative of actual results.