Tax Tip: Getting a Bigger Return With The Saver’s Credit (Up To $2,000)

Save For Retirement And Put Money In Your Pocket

Saving for retirement when you don’t have a traditional 9-to-5 can be difficult when every dollar already has a job. But what if I told you the government will actually pay you to save for retirement? That’s exactly what the Saver’s Credit does. It’s a tax credit that can put money back in your pocket while helping you build long-term financial security.

Retirement might seem far off, but every dollar you put away now makes a difference. If you’re working as a freelancer, gig worker, or small business owner, you don’t have a company-sponsored 401(k) handing you easy retirement savings. You have to build it yourself—but the Saver’s Credit is one way to get a little help along the way. If you’re eligible, don’t leave free money on the table!

Because of our Roth IRA contributions, we qualified for the Saver’s Credit and ended up with a $400 tax credit for 2024, which, let me tell you, is as good as cash.

Related: Tax Tips to Help You Survive 2025

In this article:

Save For Retirement And Put Money In Your Pocket

Why a Tax Credit is Better Than a Tax Deduction

What Is the Saver’s Credit?

Who Qualifies for the Saver’s Credit in 2025?

Real-Life Examples

How to Claim the Saver’s Credit

From 401(k) to IRA: My Retirement Savings Journey

Why a Tax Credit is Better Than a Tax Deduction

A tax credit directly reduces the amount of taxes you owe. So, let’s say your tax bill is $1,000 and you get a $400 tax credit, you now owe just $600. Or, if you’re already getting a refund of $1,000, that same $400 credit bumps it up to $1,400—real money back in your pocket.

A tax deduction reduces the amount of income you pay taxes on. Say you contribute $1,000 to a Traditional IRA, and you’re in the 12% tax bracket. That deduction reduces your taxable income by $1,000, which saves you $120 in taxes. Not bad, but definitely not as powerful as a tax credit that directly lowers your tax bill dollar for dollar.

What Is the Saver’s Credit?

The Saver’s Credit, officially called the Retirement Savings Contributions Credit, is designed to reward lower- and middle-income earners for saving for retirement. It’s available for contributions to Traditional and Roth IRAs, 401(k)s, and other qualified retirement accounts.

Related: How to Create Generational Wealth: Roth IRA Edition (with Cold, Hard Numbers)

Depending on your income, you can get a credit for 10%, 20%, or even 50% of your contributions, up to $1,000 ($2,000 for married couples filing jointly). If you’re rolling your eyes at getting $1,000 to $2,000, your tax bracket might be too high for this tip.  

Who Qualifies for the Saver’s Credit in 2025?

To be eligible, you must:

• Be at least 18 years old.

• Not be a full-time student.

• Not be claimed as a dependent on someone else’s tax return.

• Meet the income limits for the 2024 year below

Married Filing Jointly:

• 50% credit: AGI up to $46,000

• 20% credit: AGI between $46,001 and $50,000

• 10% credit: AGI between $50,001 and $76,500

• No credit: AGI above $76,500

Head of Household:

• 50% credit: AGI up to $34,500

• 20% credit: AGI between $34,501 and $37,500

• 10% credit: AGI between $37,501 and $57,375

• No credit: AGI above $57,375

Single, Married Filing Separately, or Qualifying Widow(er):

• 50% credit: AGI up to $23,000

• 20% credit: AGI between $23,011 and $25,000

• 10% credit: AGI between $25,001 and $38,250

• No credit: AGI above $38,250

Find out more about the Retirement Savings Contributions Credit on the IRS’ website.

Real-Life Examples of The Saver’s Credit in Action

Single Filer Jane contributes only $1,000 to her IRA and earned:*

• Less than $23,000 and qualifies for a 50% credit of $1,000 = $500 credit.

• Between $23,001 and $25,000 and qualifies for a 20% credit of $1,000 = $200 credit.

• Between $25,001 and $38,250 and qualifies for a 10% credit of $1,000 = $100 credit.

Head of Household Lisa contributes at least $2,000 to her IRA and earned:

• Less than $34,500 and qualifies for a 50% credit of $2,000 = $1,000 credit.

• Between $24,501 and $37,500 and qualifies for a 20% credit of $2,000 = $400 credit.

• Between $37,501 and $57,375 and qualifies for a 10% credit of $2,000 = $200 credit.

Married Filing Jointly Carlos and Maria each contribute at least $2,000 to their IRAs and earned:

• Less than $46,000 combined and qualify for a 50% credit of $4,000 = $2,000 credit.

• Between $46,001 and $50,000 and qualify for a 20% credit of $4,000 = $800 credit

• Between $50,001 and $76,500 and qualify for a 10% credit of $4,000 = $400 credit.

Basically, the lower your income (while staying within these limits) and the more you contribute, the closer you get to maxing out the credit. *If single-filer Jane contributed at least $2,000, her credits would be double.

How to Claim the Saver’s Credit

1.     Make Contributions to a Retirement Account

Contribute to a Traditional IRA, Roth IRA, 401(k), or another eligible plan before the tax deadline (April 15 for most filers).

2.     Check Your Adjusted Gross Income (AGI)

Use your W-2s, 1099s, or other income sources to calculate where you fall within the income limits.

3.     Fill Out IRS Form 8880

This form helps calculate the amount of the credit based on your contribution and income level.

4.     Enter the Credit on Your Tax Return

If using tax software, the program should guide you to claim it. If filing manually, enter the credit on Schedule 3 of Form 1040.

5.     Double-Check Your Return

Many people miss out on this credit. Ensure it’s included before submitting your return.

From 401(k) to IRA: My Retirement Savings Journey

When I landed my first “real” job, retirement savings seemed simple. My employer handed me a 401(k), matched some of my contributions, and I got a nice little tax deduction every year. Easy. Automatic. I barely had to think about it.

Then I left that job and jumped into gig work. No employer, no built-in retirement plan—just me figuring it out. That’s when I rolled my 401(k) into a Traditional IRA. Why?

• More Investment Choices – Unlike a 401(k) with limited investment options, an IRA lets me choose from a wider range of stocks, bonds, ETFs, and mutual funds.

• Lower Fees – Many 401(k) plans come with high administrative fees. IRAs often have lower costs, meaning less of my money gets eaten up by fees.

• Better Control – With an IRA, I decide where to invest, when to rebalance, and how aggressively to grow my money.

• No Employer Restrictions – Some 401(k) plans have rules that limit how and when I can access my funds. An IRA gives me more flexibility.

• Tax Deduction Benefit – Since I was self-employed and my income wasn’t high, contributing to a Traditional IRA gave me a tax deduction, lowering my taxable income and keeping me in the lowest tax bracket.

Then life hit fast—I got married, had a baby, and took six months off work. That year, our income was the lowest it would likely ever be again. And that’s when I made my smartest move: converting my Traditional IRA into a Roth IRA.

Related: Money-Saving Tips for New Parents: From Hospital Bills to College Funds

Why was this the right time? Because when you convert a Traditional IRA to a Roth, you have to pay taxes on whatever amount you move over. In a high-income year, that tax bill could be brutal. But in our lower-income year, I knew we could take the hit without getting pushed into a higher tax bracket. Even with the conversion counting as income, we stayed in the 12% tax bracket—avoiding the jump to 22%.

That $40,000 Roth IRA? Now it’s growing tax-free, and when I withdraw it in retirement, I won’t owe a single penny in taxes. That’s the kind of move that pays off for decades.