At a time when many Americans are grappling with higher everyday costs, finding ways to save money now — without sacrificing future savings — can feel increasingly difficult. But a sizable number of U.S. workers may be overlooking a little-known tax credit designed to do both.
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A new survey from the Transamerica Center for Retirement Studies found that less than half of U.S. workers (48%) know about the IRS Saver’s Credit, a federal tax incentive that rewards eligible taxpayers for contributing to retirement accounts. For those who qualify, the credit can apply to up to the first $2,000 in voluntary retirement contributions and directly reduce the amount of tax owed.
The Saver’s Credit is specifically aimed at low- to moderate-income workers and is one of the few tax benefits designed to help non-affluent Americans build long-term financial security.
Here’s what to know about how the credit works and how to claim it.
What Is the IRS Saver’s Credit?
The Saver’s Credit allows eligible taxpayers to claim a federal tax credit on qualifying retirement contributions of up to $1,000 per person or $2,000 per couple.
Unlike a deduction, which lowers taxable income, a tax credit directly offsets taxes owed. That means the Saver’s Credit can reduce your final tax bill or increase your refund if you’ve already paid taxes throughout the year.
The credit also stacks on top of other retirement benefits, including tax-advantaged investment growth and, in some cases, contribution deductions. Together, these incentives can make even modest retirement contributions more impactful over time.
How To Claim the Saver’s Credit on Your Tax Return
To claim the Saver’s Credit, you must first meet several eligibility requirements:
- Be at least 18 years old
- Not be a full-time student
- Not be claimed as a dependent on another taxpayer’s return
- Meet adjusted gross income (AGI) limits
For tax year 2025, the AGI limits are:
- Single filers: Up to $39,500
- Head of household: Up to $59,250
- Married filing jointly: Up to $79,000
It’s also important to note that you must have a tax liability to benefit from the credit — you need to earn enough income to owe federal income taxes.
Make an Eligible Retirement Contribution
If you qualify, the next step is contributing to an eligible retirement account. Qualifying accounts include:
- Traditional or Roth IRAs
- Workplace retirement plans such as a 401(k), SIMPLE IRA, SARSEP, 403(b), governmental 457(b) or 501(c)(18) plan
- ABLE accounts, when contributions are made by the designated beneficiary
Rollover contributions do not qualify for the Saver’s Credit.
Calculate Your Credit Amount
The amount of the credit depends on two factors: how much you contribute and your “credit rate,” which is based on your income and filing status. Credit rates range from 10% to 50% of qualifying contributions.
The maximum credit is:
- $1,000 for single filers
- $2,000 for married couples filing jointly
Who Benefits Most From the Saver’s Credit?
The Saver’s Credit is particularly valuable for workers early in their careers, part-time employees and households without access to generous employer retirement matches. It can also benefit those who haven’t been able to prioritize retirement savings due to tighter budgets.
For these workers, the credit can effectively lower the “out-of-pocket” cost of saving, making it easier to start or continue contributing.
Why the Saver’s Credit Matters for US Workers
“The Saver’s Credit makes it that much more affordable to save for retirement,” said Catherine Collinson, CEO and president of Transamerica Institute.
Beyond the immediate tax benefit, the credit can also encourage long-term saving habits. By contributing to a workplace retirement plan or an individual retirement account, workers may qualify for the credit while also unlocking additional tax advantages, such as tax-deferred growth.
“It helps people get started, makes it a little bit more affordable and puts them on a long-term path towards retirement through tax-advantaged accounts,” Collinson said.
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This article originally appeared on GOBankingRates.com: This Little-Known IRS Tax Credit Could Save Eligible Workers Up to $2K
