Form 8880: What Is It and How to Qualify for the Saver's Credit

The federal government offers tax credits as a way to encourage people to spend money on things that are considered to be for the greater good, such as aiding the economy or the environment. The Saver’s Credit, also known as the Retirement Savings Contributions Credit, encourages people to save for retirement – presumably so they won’t create a financial drain on society in their elder years.

The credit rewards low- and moderate-income workers for making contributions to their employer-sponsored retirement plans or individual retirement arrangements. Yet it’s rarely claimed, perhaps because many taxpayers don’t even know it exists.

Who’s Eligible?

You can claim the Saver’s Credit if you’re at least 18 years old and you’re not claimed as a dependent on anyone else’s tax return. You also can’t be a full-time student. You must claim the credit in the same tax year that you made contributions to your retirement account.

What Accounts and Contributions Qualify?

Unfortunately, not every imaginable type of plan will qualify you for the Saver’s Credit, but a good many do. Rules for rollovers and distributions apply as well.

  • Your retirement account can be either a traditional IRA or a Roth IRA. It can also be a 401(k), 403(b), 501(c)(18) or a 457 plan. SIMPLE IRAs, SEP plans and Thrift Savings Plans are qualified retirement plans too.
  • Rollover contributions – when you move funds from one plan to another – don’t count.
  • You can’t claim the credit for contributions made by your employer.
  • If you’ve taken any distributions from your plan in the two years prior to the due date for your tax return, including any extensions you might request, you must subtract these amounts from your contributions. You can only base the amount of your credit on the balance. Thrift Savings Plans are an exception to this rule.

How Much Is the Saver’s Credit?

The Saver’s Credit works out to 50, 20 or 10 percent of the first $2,000 of your qualified retirement savings contributions, or $4,000 if you're married filing jointly. The exact percentage you can claim depends on your adjusted gross income and your tax filing status.

The most anyone can possibly claim for the 2019 tax year is a percentage of $2,000, or $4,000 if they were married and filing a joint return. So the maximum credit would be $1,000, $400 or $200 if you’re a single person (50, 20 or 10 percent), or $2,000, $800 or $400 if you’re married filing jointly.

You Can Double Dip

The government really wants you to save for retirement, so you can also take an above-the-line tax deduction for your qualifying contributions in addition to claiming the Saver’s Credit. This means you can both exclude your contributions from the income you’ll pay tax on, and the same contributions also count toward making you eligible for the credit.

That’s generous indeed, an almost unheard-of gift from the Internal Revenue Service. Bear in mind that this doesn't apply to Roth contributions, which don't receive a tax deduction in the first place.

How to Calculate the Credit

The IRS publishes a chart online that you can use to determine your percentage based on your filing status and your AGI. Those who are married filing jointly have the highest, most generous AGI limits, followed by heads of household and finally all other taxpayers. The AGI limits are indexed for inflation, so they’re adjusted annually, usually increasing slightly from year to year. You can find your AGI on line 7 of your 2018 Form 1040 tax return.


  • The Saver's Credit is geared toward low- and moderate-income taxpayers, so you won't qualify for it if you earn too much.

The income limits for the 2019 tax year are $64,000 for joint married filers, $48,000 for those who qualify for head of household filing status and $32,000 for all others. The thresholds were somewhat less in 2018: $63,000, $47,250 and $31,500 respectively, and they increase marginally in 2020, to $65,000, $48,750 and $32,500.

The top 50 percent credit applies to incomes of no more than $38,500 in 2019 if you’re married, no more than $28,875 if you’re head of household and just $19,250 for everyone else. These thresholds were $38,000, $28,500 and $19,000 in 2018, and they increase to $39,000, $29,250 and $19,500 in 2020.

An Example

Let’s say that you make $2,000 in qualifying contributions to your IRA in 2019. Your AGI is $30,000. You could claim a Saver’s Credit for just 10 percent of your contributions, or $200, if you file as single, married filing separately or as a qualifying widow(er).

But if you’re head of household with an AGI of $30,000, you could claim 20 percent, or a $400 tax credit. And if you’re married and file a joint return? You’d qualify for the 50 percent credit at this income, or $1,000.

Of course, this is after you subtract any distributions you took in the last two years from that $2,000 in contributions.

A New Advantage – ABLE Accounts

Beginning in 2018, the designated beneficiaries of Achieving a Better Life Experience accounts can claim this tax credit for any contributions they make to their own accounts. Others making contributions don’t qualify, however, and funds that are rolled over from other ABLE accounts or from a Qualified Tuition Plan don’t count either.

The rule about reducing your contributions by the amount of any distributions you took applies to ABLE accounts as well.

How to Claim the Credit – Form 8880

Now that you’ve determined that you qualify, and you know how much of a credit you qualify for, how do you claim the Saver’s Credit? You must complete IRS Form 8880 and submit it with your tax return. This tax form also includes a breakdown of the appropriate percentages to apply based on your filing status and your AGI so you can – and must – complete this part, box 9 of the form, to calculate the exact amount of your credit.

You can then transfer the credit amount to Schedule 3 of the new Form 1040 for years 2018 and later, or Form 1040NR if you’re a nonresident alien.

It’s Not a Refundable Credit

Unfortunately, the Saver’s Credit isn’t one of the few refundable tax credits that are offered by the IRS. This means that although it can erase any tax debt you owe when you complete your return, the IRS won’t be sending you a check if there’s anything left over.

For example, maybe you've completed your tax return only to realize that you owe the IRS $200 because you didn’t have enough tax withheld from your paychecks all year. Not a problem. If you’re that single taxpayer with an AGI of $30,000, your $200 Saver’s Credit will wipe out your tax debt. Now you owe nothing. If you’re the head of household filer who’s eligible for a $400 credit, it will wipe out your $200 tax debt, but the remaining $200 balance more or less vaporizes. The IRS effectively keeps it.