The Saver’s Credit: A Hidden Gem That Could Save You Thousands on Taxes

When it comes to retirement savings, every dollar counts. Yet, many Americans are unaware of a valuable tax benefit designed specifically for low- to moderate-income earners. The Retirement Savings Contributions Credit, better known as the Saver’s Credit, can help eligible taxpayers reduce their tax bill while building their nest egg. Despite its potential benefits, this credit remains underutilized.

A Tax Credit Designed to Help Workers Save

The Saver’s Credit is a government incentive aimed at encouraging retirement savings. Unlike a tax deduction, which reduces taxable income, a tax credit directly lowers the amount of taxes owed. Eligible individuals can receive a credit of up to $1,000, while married couples filing jointly can claim up to $2,000.

To qualify for the Saver’s Credit in the 2024 tax year, adjusted gross income must not exceed:

– $23,000 for single filers
– $46,000 for married couples filing jointly

The credit phases out at $38,250 for individuals and $76,500 for married couples.

Despite being a valuable financial tool, the Saver’s Credit remains relatively unknown. Many eligible taxpayers either don’t realize it exists or find the process of claiming it too complicated.

Why Are So Many Missing Out?

A 2024 survey by the Transamerica Center for Retirement Studies revealed that only 50 percent of U.S. workers have heard of the Saver’s Credit. Awareness is even lower among households with incomes under $50,000, where only 44 percent are familiar with it.

Catherine Collinson, CEO and President of the Transamerica Center for Retirement Studies, has called the credit a “well-kept secret,” emphasizing that awareness is one of the biggest barriers to its utilization.

Even for those who know about the credit, determining eligibility can be challenging. Many taxpayers struggle with the necessary paperwork, and because the Saver’s Credit is non-refundable, it only benefits those who owe federal taxes. This means that lower-income individuals who don’t have a tax liability often miss out.

Upcoming Changes in 2027

Due to low participation rates, the Saver’s Credit will see a major transformation in 2027 under the Secure 2.0 legislation. Instead of functioning as a tax credit, the new Saver’s Match program will directly deposit matching funds into individuals’ retirement accounts.

This change aims to make the credit more accessible, particularly for those who don’t owe taxes. However, Emerson Sprick, Associate Director at the Bipartisan Policy Center, has warned that logistical challenges must still be addressed before the change takes effect.

How to Take Advantage of the Saver’s Credit Now

Even though 2024 has ended, qualifying taxpayers can still make IRA contributions for 2024 until April 15, 2025, and claim the Saver’s Credit for their tax return. By taking this small step, individuals can potentially lower their tax bill by up to $1,000, while married couples could receive up to $2,000 in savings.

Final Thoughts

The Saver’s Credit is one of the most overlooked tax breaks available to American workers. Though awareness is growing, many eligible individuals continue to miss out either due to lack of knowledge or a complicated claims process.

With changes on the horizon in 2027, the credit may soon become more accessible. But for those who qualify today, taking advantage of it before the tax-filing deadline could lead to significant savings. Checking eligibility now and making a retirement contribution could be a simple way to secure extra money while planning for the future.