Employers and plan sponsors can give their low- and moderate-wage workers some good news by informing them of the Saver’s Credit. This federal income tax credit was made permanent in the Pension Protection Act of 2006. To be eligible, a person must:
- be 18 years of age or older
- not be a full-time student
- not be claimed as a dependent on someone else’s return
- make contributions to a qualified IRA, 401(k) or other eligible retirement plan
- meet certain financial criteria, as described below
Depending on adjusted gross income, a participant may receive a tax credit equal to 10, 20 or 50% of up to the first $2,000 of their 2018 contributions. Joint filers may both be eligible for a credit if each contributed to a plan and they meet the income limitation. The Saver’s Credit is applied only as a reduction in the participant’s income tax liability, but is given in addition to any other tax benefits that may result from the retirement contributions. The 2018 income limits and associated Saver’s Credit are:
| 2018 Saver’s Credit Guidelines | |||
| 2018 AGI for Single Filers | for Head of Household | for Married Filing Jointly | Saver’s Credit |
| $0 to $19,000 | $0 to $28,500 | $0 to $38,000 | 50% of the first $2,000 deferred ($4,000 if Married filing jointly) |
| $19,001 to $20,500 | $28,501 to $30,750 | $38,001 to $41,000 | 20% of the first $2,000 deferred ($4,000 if Married filing jointly) |
| $20,501 to $31,500 | $30,751 to $47,250 | $41,001 to $63,000 | 10% of the first $2,000 deferred ($4,000 if Married filing jointly) |
| more than $31,500 | more than $47,250 | more than $63,000 | credit not available |
To help you make the employees in your plans aware of this potential tax savings, we have prepared a SAMPLE COMMUNICATION
It’s never too early to start saving for retirement. Employees who contribute this year may earn the following 2019 Saver’s Credit.
| 2019 Saver’s Credit Guidelines | |||
| 2019 AGI for Single Filers | for Head of Household | for Married Filing Jointly | Saver’s Credit |
| $0 to $19,250 | $0 to $28,875 | $0 to $38,500 | 50% of the first $2,000 deferred ($4,000 if Married filing jointly) |
| $19,251 to $20,750 | $28,876 to $31,125 | $38,501 to $41,500 | 20% of the first $2,000 deferred ($4,000 if Married filing jointly) |
| $20,751 to $32,000 | $31,126 to $48,000 | $41,501 to $64,000 | 10% of the first $2,000 deferred ($4,000 if Married filing jointly) |
| more than $32,000 | more than $48,000 | more than $64,000 | credit not available |
More information on the Saver’s Credit is available at www.irs.gov.