6.5- Retirement Savings Contributions Credit

Check out the 2022 cost-of-living adjustments for retirement plans and IRAs.

You may be able to take a tax credit for making eligible contributions to your IRA or employer-sponsored retirement plan. And, beginning in 2018, if you’re the designated beneficiary, you may be eligible for a credit for contributions to your Achieving a Better Life Experience (ABLE) account.

Who's eligible for the credit?

You're eligible for the credit if you're:

1. Age 18 or older,

2. Not claimed as a dependent on another person’s return, and

3. Not a student.

You were a student if during any part of 5 calendar months of the tax year you:

• Were enrolled as a full-time student at a school, or

• Took a full-time, on-farm training course given by a school or a state, county, or local government agency.

A school includes technical, trade, and mechanical schools. It does not include on-the-job training courses, correspondence schools, or schools offering courses only through the Internet.

See Form 8880, Credit for Qualified Retirement Savings Contributions, for more information.

Amount of the credit

Depending on your adjusted gross income reported on your Form 1040 series return, the amount of the credit is 50%, 20% or 10% of:

• contributions you make to a traditional or Roth IRA,

• elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan,

• voluntary after-tax employee contributions made to a qualified retirement plan (including the federal Thrift Savings Plan) or 403(b) plan,

• contributions to a 501(c)(18)(D) plan, or

• contributions made to an ABLE account for which you are the designated beneficiary (beginning in 2018).

Rollover contributions do not qualify for the credit. Also, your eligible contributions may be reduced by any recent distributions you received from a retirement plan or IRA, or from an ABLE account.

The maximum contribution amount that may qualify for the credit is $2,000 ($4,000 if married filing jointly), making the maximum credit $1,000 ($2,000 if married filing jointly). Use the chart below to calculate your credit.

Example: Jill, who works at a retail store, is married and earned $41,000 in 2021. Jill’s spouse was unemployed in 2021 and didn’t have any earnings. Jill contributed $2,000 to her IRA for 2021. After deducting her IRA contribution, the adjusted gross income shown on her joint return is $39,000. Jill may claim a 50% credit of $1,000 for her $2,000 IRA contribution on her 2021 tax return.

Additional resources

• Individual Retirement Arrangements (IRAs)

• Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)PDF

• Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)PDF

• Form 8880, Credit for Qualified Retirement Savings Contributions PDF