Saver’s Credit Ends, Saver’s Match Begins

The federal Saver’s Credit program was created by Congress in 2001 in an effort to encourage low- and moderate-income workers to save for retirement. It provided a tax credit (a dollar-for-dollar reduction of the income tax owed) worth up to 50 percent of the first $2,000 of voluntary retirement contributions made during the tax year. For example, if a qualifying taxpayer placed $2,000 in an IRA account during the year, they could claim a $1,000 credit against any tax they owed.

Unfortunately, the Saver’s Credit was “non-refundable,” meaning that the credit amount could not exceed a person’s federal income tax liability for the year. Thus, it did not have the effect of providing significant relief to its intended beneficiaries because low-income taxpayers typically owe little to no income tax. In addition, few taxpayers knew about the credit and the cost of paying a tax preparer to file the form to claim the credit wiped out much of the benefit.

Beginning January 1, 2027, the Saver’s Credit will be replaced by the Saver’s Match, created by the SECURE Act of 2022. The Saver’s Match is also a federal program designed to encourage qualifying taxpayers to save for retirement. Instead of providing a tax credit however, it deposits a matching government cash contribution of up to $1,000 per person per year directly into the saver’s retirement account. Specifically, the federal government will match up to 50 percent of the first $2,000 contributed to an eligible retirement plan each year. The match amount can exceed the saver’s tax liability, making it beneficial to more taxpayers. The match amount is a pre-tax contribution to the account, meaning that amounts withdrawn are subject to income tax. There is no minimum contribution amount to qualify for Saver’s Match.

Who is eligible

Eligibility for the match and the match amount depend on a taxpayer’s age, filing status, and income. As income goes up, the match percentage goes down. Any US individual who has reached age 18 as of the close of the tax year and made contributions to a retirement plan may be eligible for the Saver’s Credit. The definition of eligible individual does not include individuals who are dependents on another taxpayer’s tax return, full-time students, or someone who is not a US resident for tax purposes. Here are the IRS income limits that will apply for each filing status:

Single or Married Filing Separately

• Full match (50 percent): Modified adjusted gross income up to $20,500
• Partial match: Modified adjusted gross income between $20,501 and $35,499
• No Match: Modified adjusted gross income of $35,500 or more

Head of Household

• Full match (50 percent): Modified adjusted gross income up to $30,750
• Partial match: Modified adjusted gross income between $30,751 and $53,249
• No Match: Modified adjusted gross income of $53,250 or more

Married Filing Jointly or Qualifying Surviving Spouse

• Full match (50 percent): Modified adjusted gross income up to $41,000
• Partial match: Modified adjusted gross income between $41,001 and $70,999
• No Match: Modified adjusted gross income of $71,000 or more

Income limits will be adjusted for inflation in years after 2027.

Types of qualifying retirement plans

Contributions to many types of retirement plans will qualify you for the Saver’s Match. Some of these plans include (but are not limited to):

• Roth IRAs
• 401(k) plans
• 403(b) plans
• SIMPLE IRA plans
• SEP plans
• Profit-Sharing plans
• Others

How to apply for Saver’s Match

To claim the Saver’s Match for tax year 2027, you will need to file IRS Form 8880-A (not available yet) along with your annual federal tax return in 2028. If you participate in the Saver’s Match, it is important to remember that withdrawals made before age 59 ½ may be subject to additional taxes and restrictions.

If you or someone you know would like additional information about Saver’s Match, please give one of our tax professionals a call. We love hearing from you and would be happy to answer your questions.