What is the Saver’s Credit?
The Saver’s Tax Credit details in this article have been updated for the 2022 and 2023 tax years.The Saver’s Credit (aka the ‘Retirement Savings Contribution Credit‘) is a lesser known, highly advantageous tax credit that the IRS offers to incentivize low and moderate income taxpayers to make retirement contributions to an IRA, 401K, 403B, 457B, or any other IRS recognized retirement account.
What is nice about the Saver’s Credit is that it is an actual tax credit – not merely a tax deduction. If you’re not sure how the two differ, a tax deduction simply subtracts the value from your taxable income and you pay taxes on the remaining taxable income. A tax credit, on the other hand, actually gives you the entire dollar value back or subtracts the value from the taxes you owe – making it far more valuable monetarily than a deduction. In the case of the Saver’s Credit, it is non-refundable, meaning it can only be subtracted from the…
This article was written by G.E. Miller and originally published on 20somethingfinance.com