Skip to main content

McKinley Carter Receives '2023 Best Places to Work' Award from InvestmentNews

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 1342418985 copy women USE

Introducing The SAVVY: Financial Education Just for Women 

At McKinley Carter, we recognize we are uniquely situated to help women “do better” with their money. We are so proud to announce the launch of The Savvy – A Society of Women Pursuing Their Ideal Life. The Savvy will bring real world financial tips, insights, and education directly to the women we serve through digital communications, in-person events, and one-on-one conversations. Learn what's coming in 2023 and beyond to help women better embrace their relationship with money.

Read More
I Stock 1181845094 copy 800px

Purpose: The Missing Piece in Your Plan to Retire

For those preparing for retirement, it is an exciting time. You have planned and worked hard to get to to this point, building your identity in your community, making friends, and making a difference in the world around you. However, when retirement is finally achieved, it can often create a sudden void that can be difficult to fill. It's very important to think through ways to find purpose during your retirement years. Here are five ways to help you do just that!

Read More
I Stock 1063301176 JA Eblog

Rental Property: Investment or Job?

For individuals who have thought about getting into rental properties as an easy way to make cash while building assets for retirement, it will be important that you do your homework and set appropriate expectations of the venture. Learn more about calculating the returns on rental property.

Read More
Play