What this line means
The Saver’s Credit — a credit for contributions you made to a traditional or Roth IRA, 401(k), 403(b), 457, SIMPLE, or SEP plan. The credit is 10%, 20%, or 50% of up to $2,000 in contributions ($4,000 for married filing jointly), depending on your filing status and adjusted gross income. Maximum credit is $1,000 per person ($2,000 for a couple). You calculate it on Form 8880.
Does this apply to you?
- You contributed to a 401(k), 403(b), 457, SIMPLE, SEP, traditional IRA, or Roth IRA during the year
- Your AGI is $39,500 or less (single), $59,250 or less (head of household), or $79,000 or less (married filing jointly) for 2025
- You are age 18 or older, not a full-time student, and not claimed as a dependent on someone else’s return
Easy to overlook
The credit is in addition to the tax deduction for traditional IRA or 401(k) contributions The Saver’s Credit is a separate benefit from the deduction you receive for contributing to a traditional retirement account. 1 A single filer with AGI of $20,000 who contributes $2,000 to a traditional IRA gets both a $2,000 deduction (reducing taxable income) and a $1,000 credit (reducing tax owed). Many low- and moderate-income filers do not realize this credit exists and leave it unclaimed. General filing pattern — low-income savers unaware of Saver’s Credit
Rollovers and loan repayments do not count Only new contributions qualify for the credit. Rolling over a balance from one retirement account to another does not count, and neither do loan repayments to a 401(k). 2 The credit is also reduced by any distributions you received from a retirement plan in the current year, the two prior years, or the period after the current year-end through the due date of the return. A filer who took a hardship distribution and then contributed the same amount back does not get the full credit. IRS Form 8880 Instructions — Credit for Qualified Retirement Savings Contributions
Watch out for this
Claiming the credit as a full-time student. Full-time students are not eligible regardless of income level. The IRS defines full-time as enrolled for the number of hours or courses the school considers full-time for at least five months during the year. A 22-year-old college senior with a part-time job who contributes to a Roth IRA does not qualify for this credit.
Footnotes
-
IRS Form 8880 Instructions, Who Can Take This Credit. https://www.irs.gov/instructions/i8880 ↩
-
IRS Form 8880 Instructions, Contributions That Qualify. https://www.irs.gov/instructions/i8880 ↩