The Retirement Saver's Credit Is Worth Up to $2,000 in 2024. Do You Qualify?

Planning for retirement can often take a backseat when you're juggling everyday expenses. However, if you can set aside some money in a retirement plan this year, the government will reward you with a tax credit if your income falls below a certain threshold. For 2024, you may be eligible for a Saver's Credit worth up to $2,000 when you contribute to a qualified retirement savings plan such as a 401(k) or Roth IRA.

Surprisingly, a survey found that only 47% of U.S. workers are aware of this credit. We'll break down the eligibility requirements and explain how the Saver's Credit works so you can take full advantage of this opportunity if you qualify.

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Save money with the Saver's Credit

Credits are a powerful way to save money on your tax return, and the Saver's Credit, also known as the Retirement Savings Contributions Credit, can reduce or even eliminate your tax bill if you owe the IRS this year. If you're single, the maximum credit you can claim is $1,000. But if you're married, your credit could be twice as much. It's important to note that the Saver's Credit is nonrefundable, so you won't receive a tax refund if your credit is worth more than you owe.

For example, let's say you are a gig worker and end up with a $500 tax bill. If you are single and qualify for a $700 Saver's Credit, the credit would cover your tax bill. However, you won't be able to keep the remaining $200 credit that you didn't use since the Saver's Credit is nonrefundable.

While eliminating your tax bill is an appealing offer, there are a few requirements you need to meet to qualify for the Saver's Credit, including:

• You must be at least 18 years old.
• You can't be claimed as a dependent on someone else's tax return.
• You cannot be a full-time student.

Contribute to a qualified retirement account

The point of the Saver's Credit is to help low-and-moderate income taxpayers save for retirement, so you'll need to contribute to a qualifying retirement plan to claim this credit. As you plan your financial moves for the rest of 2024, check if you have access to any of the following retirement accounts to enjoy the benefits of the Saver's Credit:

• 401(k)
• 403(b) plan
• Governmental 457(b) plan
• Thrift Savings Plan (TSP)

The plans above are workplace retirement plans , so you'll need to contribute to those accounts by December 31, 2024 so that your contribution can count toward the 2024 Saver's Credit. However, you can make contributions to certain other accounts, such as a traditional IRA or Roth IRA until April 15, 2025, or whatever the due date for filing a 2024 tax return. Individual retirement accounts are not tied to your employer, so you can do your research and open an account at a financial institution. You can contribute up to $7,000 to an IRA if you are under 50 and up to $8,000 if you are older. Your contributions can qualify you for the 2024 Saver's Credit.

Check the income requirements every year

Keep tabs on your income this year, as it will determine if you qualify for the 2024 Saver's Credit. Depending on your adjusted gross income (AGI) and filing status, you may be able to claim a credit worth 50%, 20%, or 10% of your qualifying contributions to a retirement account.

For example, if you are married filing jointly, contribute $4,000 to a Roth IRA, and have a combined AGI of $45,000 in 2024, you could qualify for the maximum 50% credit of $2,000 for your $4,000 contribution on your 2024 tax return. However, if you are married filing jointly, you won't be able to claim the credit if AGI exceeds $76,500 in 2024.

Take a look at the income thresholds below to see if you might qualify for the 2024 Saver's Credit.

Data source: IRS

Review the requirements for the Saver's Credit to see if you qualify. If you do, you'll be able to reduce your tax bill while boosting your retirement savings, giving you more income sources to enjoy during retirement.

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