The Saver's Credit is one of the most valuable tax credits for eligible investors. Eligible Americans can claim this credit, valued at up to $2,000, if they invest in certain retirement accounts.
But if you want to take full advantage of this credit for 2021, you're running out of time. Here's why you should act quickly to start making the necessary retirement contributions so you can get the full Saver's Credit you're entitled to.
Can you claim the Saver's Credit?
The Saver's Credit is for middle- and low-income Americans and provides a tax credit of 10% to 50% for contributions to qualifying retirement accounts.
You get this credit on up to $4,000 in contributions for married tax filers, so it's worth up to $2,000 for couples. And if you're a single filer, you get the credit on up to $2,000 in contributions, so it can save you as much as $1,000 on your taxes.
Once income exceeds a certain threshold, though, you are no longer eligible for the Saver's Credit. The table below shows who is eligible — and how much their credit is worth — based on adjusted gross income (AGI).
Tax Credit You're Eligible for Based on AGI
Income Limits for Married Joint Filers
Income Limits for Heads of Household
Income Limits for Other Filing Statuses
50% of eligible contributions
$0 to $39,500
$0 to $29,625
$0 to $19,750
20% of eligible contributions
$39,501 to $43,000
$29,626 to $32,250
$19,751 to $21,500
10% of eligible contributions
$43,001 to $66,000
$32,251 to $49,500
$21,501 to $33,000
If your income exceeds these amounts, you aren't eligible for the Saver's Credit.
Why you need to act quickly to make the most of it
To claim the full Saver's Credit, you must contribute at least $2,000 for single filers or $4,000 as a married joint filer to an eligible retirement savings account such as:
A traditional or Roth IRA
a 401(k), 403(b) or 457(b)
A SEP or SIMPLE plan
Another qualified retirement plan such as the federal Thrift Savings Plan
An ABLE account
A 501(c)(18)(D) plan
For some of these accounts, such as a 401(k), you typically have only until the end of the calendar year to make your contributions. Other accounts, such as IRAs, allow you to invest up until the tax filing deadline (which means the April deadline or, if you've filed for an extension, the October deadline).
If you're contributing to an account with a calendar-year deadline, you have less than two months left to make the full amount of your contributions for this year to avoid missing out on any of your credit. And even if you have until April or October, it's often best to try to get your investments done by the end of 2021.
Otherwise, if you fall behind and must make some of your contributions in 2022 to claim your 2021 credit, you'll be working on investing for this year when you could be working on saving for next year's credit. You'll be perpetually behind if you want to claim this free money each year you're eligible for it.
If you can, try to invest as much as possible before Dec. 31, 2021. Consider using holiday cash you get as gifts or your holiday bonus to do so. If you can end 2021 knowing you've claimed your free money from Uncle Sam to shore up your future, you'll have gone a long way toward building on the retirement security you deserve.
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