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Editor’s Note: This story originally appeared on The Penny Hoarder.
Believe it or not, the government will pay you to save.
Seriously. Check this out.
It’s called the Saver’s Credit, and it’s one of the most valuable tax credits available. But it’s also one of the most overlooked.
Keep reading to learn who is eligible for the Saver’s Credit and how it works.
What Is the Saver’s Credit?
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The Saver’s Credit is a way to put money back in your pocket when you save for retirement.
If you’re a low- or middle-income worker, you can claim the Saver’s Credit — also known as the retirement savings contributions credit — by adding money to a 401(k) or individual retirement account (IRA).
The Saver’s Credit is worth up to $1,000 for single filers, or $2,000 for married couples filing jointly.
Depending on your adjusted gross income and tax filing status, you can claim the credit for 50%, 20% or 10% of the first $2,000 you contribute to a retirement account within a tax year.
Not only do a lot of people forget about this credit, many low-income workers miss out on the sweet tax benefits of saving for retirement because they worry doing so will strain their tight budgets.
It’s worth checking to see if you qualify for the Saver’s Credit, especially if you or your spouse were unemployed or experienced a reduction of income in 2021.
How Do You Qualify for the Saver’s Credit?
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First, you’ll need to meet some basic requirements.
To be eligible for the Saver’s Credit, you must:
- Be 18 years or older and file a tax return.
- Not claimed as a dependent on someone else’s tax return.
- Not be a full-time student. (However, you’re still eligible for the Saver’s Credit if you’re enrolled in an online-only school or participating in on-the-job training).
- Save some money in a retirement account, like an employer-sponsored 401(k).
The Saver’s Credit can be claimed by any filing status: Married filing jointly, head of household, single, married filing separately or qualifying widow(er).
The Internal Revenue Service sets maximum adjusted gross income caps for the retirement savings contribution credit each year.
When you file your 2022 taxes for the 2021 tax year, your adjusted gross income (AGI) must fall below the following thresholds to qualify for the Saver’s Credit:
- $66,000 for married filing jointly
- $49,500 …….
