Why the Saver's Credit may be worth looking into

Retirement Savings Contributions Credit, better known as Saver's Credit, was developed to encourage workers with low and moderate incomes to save for retirement. Few taxpayers actually take advantage of the program, however, with only 5.7% claiming the credit, according to the latest statistics.¹

This could be a missed opportunity. The Saver's Credit can reduce an individual's federal income tax bill by up to $1,000 or $2,000, depending on whether they file an individual or joint return.²

In a nutshell, the tax credit is not a deduction or refund. It can reduce the employee's and employer's tax liability dollar-for-dollar.³

Employee tax credit:

• Available to participants of a traditional or Roth IRA, elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP or SIMPLE plan²
• Maximum $1,000 personal tax credit ($2,000 if married filing jointly)²
• Participant income is less than $80,500 to qualify (depending on how they file)⁴

Employer tax credit:

• Available for 401(k), SEP, SIMPLE IRAs and other qualified plans³
• Maximum $5,000 plan sponsor tax credit for employers with 100 employees or less³
• Tax credit could cover up to 100% for companies with 50 or fewer employees or up to 50% with 51-100 employees of plans costs including installation, administrative fees and costs to educate employees within a certain threshold³
• Valid for the first three years a plan is offered³

Want to take a deeper dive? Continue reading to better understand the potential tax benefits of the Saver's Credit. The 2026 IRS income limits, used to determine an individual's eligibility, can help guide those conversations along with a few other important considerations outlined in this article.⁴

What types of contributions qualify for the Saver's Credit?

The first step toward becoming eligible for the credit is saving money in a retirement account.

When it comes to a retirement plan, participants may be able to claim the tax credit for elective salary deferral contributions to a 401(k), 403(b) or governmental 457(b) plan. It may also apply to an employee's voluntary after-tax contributions made to a qualified retirement plan (including the Thrift Savings Plan) or 403(b) plan. Rollover contributions, however, do not qualify for the credit.²

How much is the Saver's Credit worth?

The Saver's Credit is worth 10%, 20% or 50% of the retirement plan contribution amount in a given year, depending on the investor's income. (More on that in a minute.) The maximum possible individual contribution is $2,000, or for married couples filing a joint return, $4,000.²

That means the maximum amount of the Saver's Credit itself is $1,000 or $2,000, depending on a person's tax-filing status. And that comes right off the top of their tax bill.²

Remember, while a tax deduction only lowers taxable income, a tax credit lowers the amount of taxes owed—or can potentially increase a tax refund.

What are the income limits for the Saver's Credit?

The Saver's Credit is for taxpayers with low to moderate incomes. To be eligible, their adjusted gross income (AGI) must remain under a certain threshold.

For 2026, individuals may be eligible for the Saver's Credit if their annual gross income (AGI) falls into the following brackets:²

*Single, married filing separately or qualifying widow(er)

Who is eligible for the Saver's Credit?

There are a few other stipulations for the Saver's Credit that individuals should know about. Notably, individuals must be 18 or older, not claimed as a dependent on another person's return and not a student. To be considered a student, you must have been enrolled as a full-time student at a school or have taken a full-time, on farm training course given by a school or a state, county or local government agency during any part of five calendar months of the tax year.² Also, if someone withdraws or recently withdrew savings from a retirement plan, IRA or ABLE account, their eligible contributions may be reduced.²

Help your retirement plan participants and investors determine their eligibility so they can decide whether they want to take advantage of the Saver's Credit. Learn more about the other provisions and restrictions on the IRS Saver's Credit webpage.