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IRS Newswire November 25, 2024
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Issue Number: IR-2024-298
Inside This Issue
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*Save for retirement now, get a tax credit later: Saver’s Credit can help low- and moderate-income taxpayers save more in 2025*
WASHINGTON —The Internal Revenue Service today reminded low- and moderate-income taxpayers that they can save for retirement now and possibly earn a tax credit in 2025 and future years.
The Retirement Savings Contributions Credit, also known as the Saver’s Credit [ [link removed] ], helps taxpayers offset a portion of the first $2,000 ($4,000 if married filing jointly) they voluntarily contribute to Individual Retirement Arrangements (IRAs), 401(k) plans and similar workplace retirement programs.
The credit also helps eligible persons with a disability who are the designated beneficiary of an Achieving a Better Life Experience (ABLE) account and contributes to that account. For more information about ABLE accounts, see Publication 907, Tax Highlights for Persons with Disabilities [ [link removed] ]_,_ on IRS.gov.
The maximum Saver’s Credit is $1,000 ($2,000 for married couples). The credit can increase a taxpayer’s refund or reduce the tax owed but is affected by other deductions and credits. Rollover contributions do not qualify for the credit, and distributions from a retirement plan or ABLE account reduce the contribution amount used to figure the credit.
*Who is eligible?*
Taxpayers can use the Interactive Tax Assistant tool for the Saver’s Credit [ [link removed] ] to determine their eligibility. A taxpayer is eligible for the credit if they’re:
* Age 18 or older,
* Not claimed as a dependent on another person’s return, and
* Not a full-time student.
Furthermore, the Saver’s Credit can be claimed by:
* Married couples filing jointly with adjusted gross incomes up to $76,500.
* Heads of household with adjusted gross incomes up to $57,375.
* Married individuals filing separately and singles with adjusted gross incomes up to $38,250.
* Qualified surviving spouse filers.
*Contribution deadlines*
Individuals with IRAs have until April 15, 2025 - the due date for filing their 2024 return - to set up a new IRA or add money to an existing IRA for 2024. Both Roth and traditional IRAs qualify.
Individuals with workplace retirement plans still have time to make qualifying retirement contributions and possibly get the Saver’s Credit on their 2024 tax return. Contributions to workplace retirement plans must be made by December 31 to a:
* 401(k) plan.
* 403(b) plan for employees of public schools and certain tax-exempt organizations.
* Governmental 457 plan for state or local government employees.
* Thrift Savings Plan (TSP) for federal employees.
See the instructions to Form 8880, Credit for Qualified Retirement Savings Contributions [ [link removed] ], for a list of qualifying workplace retirement plans and additional details. Finally, visit the Saver’s Credit [ [link removed] ] page on IRS.gov to learn about rules, contribution rates and credit limits.
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