Pay Zero Taxes – Feat. The Saver’s Credit | Low to Mid-Income Taxpayers

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As a former IRS Agent, I try to explain federal taxes to defend against an audit. While there are no guarantees, it’s good to have an insiders view.

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This is the first video in a series on how to pay zero in federal taxes. In this series, I am going to share ways that you can reduce your federal taxes to try to come close to that magic number zero. This video covers the savers credit.

#saverscredit

00:00 – Savers credit
00:27 – Purpose
00:58 – AGI limits 2024 tax year
01:24 – What accounts qualify
02:15 – Maximum credit amount
03:25 – Example
04:09 – Adjust your W4
04:50 – Future changes

TRANSCRIPT:
The savers credit is also known as the retirement savings contribution credit. This credit is given to incentivize low to mid-income taxpayers to make retirement contributions. You can possibly receive a credit for 50%,
20%, or 10% of your contribution amount. The amount that you may contribute is based on your filing status and adjusted gross income.

When you file your taxes in 2025 for the 2024 tax year the maximum income limits will be $76,500 for married filing jointly, $57,375 for head of household, and $38,250 for everyone else. Each year the maximum income limits are adjusted for inflation, so you should check each year to see if you qualify to take the savers credit.

You can take the credit only for new contributions. So, you cannot take the credit on rollovers. You can make your contributions to a typical retirement account such as, a traditional or Roth IRA, 401(k), SIMPLE IRA, ABLE account, SARSEP, a 501(c)(18)(D) plan, a 403(b), or 457(b) plan. If you make a tax-deductible contribution OR a “before tax” contribution, your taxable income will be reduced AND you can get a saver’s credit on top of that. Please keep in mind though, that if you make a distribution from your retirement plan or account, any contributions that you make that year may be reduced, so the credit you receive might be lower. Dependents and full-time students cannot take the credit.

The savers credit is a nonrefundable credit worth up to $1,000. It’s worth up to $2,000 if you are married filing jointly. So, this means that the maximum retirement contribution that you can make in order to get the most credit is $2,000 OR $4,000 if you are married filing jointly. If allowed, you may still contribute more to your retirement account but you just won’t be able to take a savers credit for contributions made above the savers credit maximum contribution limit.

You probably already know that tax credits are better than deductions because credits decrease your taxes dollar for dollar. Having tax credits is a good way to decrease your tax bill and get you closer to paying zero in federal taxes. The fact that the savers credit is nonrefundable means that if you have any savers tax credit amount leftover after your tax liability has been reduced to zero, you won’t receive a tax refund for the leftover amount. This won’t affect the amount that you will receive for REFUNDABLE tax amounts though. You will still get a federal tax refund if you have too much taken out in federal tax withholding from your paycheck or if you have any refundable credits.

I know that you might think that there is no way that you can afford to make a retirement contribution in today’s economy, but you can adjust your W4 to have less taken out of your paycheck for federal taxes. This should help to reduce the impact of having a retirement contribution coming out.

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One of the biggest headaches for many people come tax season is the dreaded tax bill that they have to pay. However, what if I told you that there is a way for low to mid-income taxpayers to pay zero taxes? Yes, you read that right – zero taxes!

One of the valuable tools that low to mid-income taxpayers can take advantage of is the Saver’s Credit. The Saver’s Credit is a tax credit that allows individuals or families who make contributions to a retirement account, such as a 401(k) or IRA, to reduce their tax bill or even eliminate it entirely.

The Saver’s Credit is designed to encourage people to save for retirement by providing a tax incentive to those who contribute to their retirement accounts. It is available to individuals with an adjusted gross income (AGI) of up to $32,000 for single filers, $48,000 for heads of household, and $64,000 for married couples filing jointly.

The amount of the credit can range from 10% to 50% of your retirement account contributions, depending on your income level. For example, if you are a single filer making $25,000 a year and contribute $1,000 to your IRA, you could receive a tax credit of 20% of your contribution, or $200.

In some cases, depending on your income level and the amount of your contributions, you could potentially reduce your tax bill to zero or even receive a refund through the Saver’s Credit. This can be a huge benefit for low to mid-income taxpayers who are struggling to make ends meet.

In order to qualify for the Saver’s Credit, you must be at least 18 years old, not a full-time student, and not claimed as a dependent on someone else’s tax return. You must also make contributions to a qualifying retirement account, such as a traditional or Roth IRA, 401(k), or 403(b).

If you meet the eligibility requirements, be sure to claim the Saver’s Credit on your tax return. You can do this by filling out Form 8880 and including it with your tax filing. The credit will be applied directly to your tax bill, reducing the amount you owe or potentially resulting in a refund.

In conclusion, the Saver’s Credit is a valuable tax incentive that can help low to mid-income taxpayers reduce or even eliminate their tax bill. By contributing to a retirement account and claiming the credit on your tax return, you can take advantage of this benefit and pay zero taxes. So, don’t miss out on this opportunity to save money and secure your financial future.