IRS has reminded eligible workers from low and moderate income groups to make qualifying retirement contributions and get the Saver’s Credit on their 2022 tax return. Taxpayers have until the due date for filing their 2022 return, that is April 18, 2023, to set up a new IRA or add money to an existing IRA for 2022. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, helps offset part of the first $2,000 workers voluntarily contribute to Individual Retirement Arrangements, 401(k) plans and similar workplace retirement programs. The credit also helps any eligible person with a disability who is the designated beneficiary of an Achieving a Better Life Experience (ABLE) account, contribute to that account. The Saver’s Credit is available in addition to any other tax savings that apply, and contributions to both, Roth and traditional IRAs qualify for the credit.
Taxpayers participating in workplace retirement plans must make their contributions by December 31, 2022. The Saver’s Credit supplements other tax benefits available to people who set money aside for retirement. The Service also urges employees who are unable to set aside money in 2022, to schedule their 2023 contributions soon, so their employers can begin withholding them in January, 2023.
The IRS also informs taxpayers about the eligibility and restrictions to Saver’s Credit:
- Saver’s Credit can be claimed by married couples filing jointly with incomes up to $68,000 in 2022 or $73,000 in 2023, heads of household with incomes up to $51,000 in 2022 or $54,750 in 2023, married individuals filing separately and singles with incomes up to $34,000 in 2022 or $36,500 in 2023.
- Eligible taxpayers must be at least 18 years of age.
- Anyone claimed as a dependent on someone else’s return cannot take the credit, and any person enrolled as a full-time student during any part of 5 calendar months during the year, cannot claim the credit.
A taxpayer’s credit amount is based on their filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs or ABLE accounts. The Service has cautioned that, though the maximum Saver’s Credit is $1,000 ($2,000 for married couples), it was often much less.
The IRS has also announced that, any distributions from a retirement plan or ABLE account, reduces the contribution amount used to figure the credit. For 2022, this rule applies to distributions received after 2019 and before the due date, including extensions, of the 2022 return.