With one month remaining until the April 15, 2016 tax filing deadline, low to middle income taxpayers should remember to take advantage of the federal Retirement Savings Contribution Credit (Saver’s Tax Credit). The Saver’s Tax Credit provides low to middle income individuals who have contributed to an employer 401(k), 403(b) or 457(b) plan, to an IRA and to certain other retirement savings programs, a direct federal tax credit up to a dollar maximum. Because this is a tax credit, it reduces a taxpayer’s federal income tax by the amount of the credit and is available to taxpayers who do not itemize deductions.
To claim the Saver’s Tax Credit, an individual must be at least age 18, not a full-time student, cannot be claimed as a dependent on another person’s tax return and have contributed to a covered retirement program. The amount of the credit is a percentage of the taxpayer’s contribution up to $2,000 ($4,000 for married filing jointly) based on the taxpayer’s filing status and adjusted gross income as follows:
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2015 Saver’s Tax Credit
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Credit Rate
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Married Filing Jointly
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Head of Household
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All Other Filers
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50% of contribution
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AGI not more than $36,500
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AGI not more than $27,375
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AGI not more than $18,250
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20% of contribution
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$36,501 – $39,500
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$27,376 – $29,625
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$18,251 – $19,750
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10% of contribution
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$39,501 – $61,000
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$29,626 – $45,750
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$19,751 – $30,500
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0% of contribution
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more than $61,000
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more than $45,750
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more than $30,500
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2016 Saver’s Tax Credit
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Credit Rate
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Married Filing Jointly
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Head of Household
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All Other Filers
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50% of contribution
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AGI not more than $37,000
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AGI not more than $27,750
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AGI not more than $18,500
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20% of contribution
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$37,001 – $40,000
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$27,751 – $30,000
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$18,501 – $20,000
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10% of contribution
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$40,001 – $61,500
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$30,001 – $46,125
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$20,001 – $30,750
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0% of contribution
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more than $61,500
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more than $46,125
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more than $30,750
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Employers who sponsor retirement programs should remind their employees of the Saver’s Tax Credit each year. Also, every taxpayer who qualifies should claim the credit for 2015 and should take the credit into account when making contributions to a retirement program in 2016.
For more information, please contact Jordan Schreier in our Ann Arbor, Mich. office at 734-623-1945.
