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Saving for Retirement

Saver's Credit: A Retirement Tax Break for the Middle Class

Your retirement contributions could be the key to a lower tax bill.

Saving for retirement is even more rewarding if your earnings are low enough to qualify for the Saver's Tax Credit. Single filers with adjusted gross income of $30,500 or less may be eligible. Taxpayers married filing jointly must have an AGI of $61,000 or less.

See Also: IRS Audit Red Flags for Retirees

Fall within the income limits and you can claim a tax credit worth up to $1,000 for singles or $2,000 for joint filers. The credit is based on 10% to 50% of the amount you contribute to retirement accounts including 401(k)s, traditional IRAs and Roths. The lower your income, the higher the percentage you get back via the credit.

Some people can’t claim the Saver’s Credit, regardless of income. Taxpayers under 18, full-time students and those claimed as dependents aren’t eligible. But if you do qualify, every dollar you claim is one dollar less you have to pay in taxes.

Check out 8 more tax breaks for the middle class.