Skip to main content

Register for our live webinar on 7/7/22: Behind Every Bear Market Is an Opportunity

Happy young couple calculating bills at home

Tax Saver’s Credit: Found Mon$y for Retirement

Photo of author, Monica Garver, CPA, CFP®, AIFA®, CDFA®.
Monica Garver, CPA, CFP®, AIFA®, CDFA®
Director of Retirement Plan Services and Financial Strategist

We all know how hard it is to find money to save for retirement, but did you know that the government offers a tax credit for participating in your retirement plan? Think of it as an instant reduction to your taxes…what’s not to love?

The Saver’s Tax Credit is designed for those with low to moderate incomes and has the potential to reduce your tax bill by up to $1,000 when you make contributions to your employer sponsored retirement plan. Your tax credit can be as low as 10% or as high as 50% depending on your adjusted gross income and filing status (see the table below). A credit is a dollar for dollar reduction in your tax bill, which makes it even better!

Let’s look at an example. Sue and Joe are married, filing jointly with an Adjusted Gross Income of $38,000. They each contribute $2,000 to their respective employer retirement plans – for a total contribution of $4,000. Looking at the chart below, they would qualify for a 50% tax credit. For them, that means a credit of $2,000 off their tax bill! They each have been able to maximize the allowable credit by contributing $2,000. So, in essence, it only “cost” them $1,000 to to have a $2,000 addition to their accounts.

The Tax Saver’s Credit is applicable to virtually all employer-sponsored retirement plans including 401(k), 403(b), 457(b), Simple, as well as SEP plans. However, there are a few requirements that must be met in order to qualify for the Tax Saver’s Credit. You must be at least 18 years old, not a full-time student, and not claimed as a dependent on someone else’s tax return.

The Tax Saver’s Credit can help those who qualify to BOTH save for retirement and save taxes! A win-win!

Voya Chart

Related Insights
I Stock 518591158 FINAL IMAGE SAT blog Feb2022

Do You Have a Financial Timeline?

A financial timeline is a great way to help you track and understand financial data points from your past, as well as map out potential data points in the future for planning purposes. If you've never considered your own financial timeline, you should. Here's why.

Read More
I Stock 1324691776 JMJ blog Banner resized

Is My Money Improving My Life?

With the new year comes new resolutions and goals. If you're looking to get your financial house in order in 2022, don't forget to focus on your Return on Life. Learn what steps to take to help your financial goals become reality.

Read More
I Stock 1226418360 businessowner JGS Craft

Did You Know Less Than 2% of Businesses Value Themselves Annually?

If you're a business owner or entrepreneur, your business is your greatest asset. Not only do you invest your time and talent into growing your business, it takes significant capital too. But did you know less than 2% of businesses actually take the time to value themselves annually? Whether it’s simply due to a lack of time or expertise, today's business owners don't do a deep-dive analysis into their businesses every year, which results in a significant number of them being undercapitalized. Learn what you can do to keep your business operating at its full potential.

Read More
Play