Retirement Savings Contributions Credit (Saver’s Credit)

[runnerdude]

hi ...

can i claim the saver's tax credit if i have no  W2 income ?

i'm retired and my income is from social security , savings, interest income, etc ...

ie, i have no earned income ...

but my AGI is within the required limits to claim the credit ...

so if i contribute to a traditional IRA, can i claim the credit ?

the IRS website didn't say anything about having to have "earned income"

to claim the credit ...

thanks so much

[AnnetteB6]

Having earned income is not part of the eligibility for claiming the Saver's Credit.  

You can always use TurboTax to determine with certainty whether you qualify for the credit by entering a tentative amount for a contribution to your Traditional IRA and then go through the section of the return for the Saver's Credit to make sure you qualify for it.  

Take a look at the following TurboTax article to learn more:

What Is the Savers Credit?
 

[runnerdude]

thanks ... i'm pretty sure i meet all the requirements for claiming the  saver's tax credit ...

i've never claimed it however because i thought you had to have "earned income"

like you do for the earned income tax credit ...

as i understand it now, the EITC requires "earned income" to claim it whereas

the saver's credit just requires that you have a low AGI and a few other things ...

thanks so much

[dmertz]

With no earned income (by either you or, if filing jointly, your spouse), you are not permitted to make a retirement contribution that would qualify you for any amount of this credit.  

[runnerdude]

thanks ... but your answer is different than what annette said ... turbotax says earned income is not a requirement to claim this credit ? i'm not sure who to believe ... thanks

[AmyC]

Trust the IRS. Taxpayers can use the Interactive Tax Assistant tool for the Saver's Credit to determine their eligibility. 

All the qualifying funds to put money in that  I can think of would require an income, IRA, 401K, etc. Take the quick IRS quiz!

[VolvoGirl]

@runnerdude   Both are true.  Having earned income is not listed as a requirement for the Retirement Savers Credit. But you do need earned income to make a IRA contribution.   How are you going to make a IRA contribution with no W2 or self employment income?  

[runnerdude]

so i'm a senior ... i have a low AGI and am within the bounds required to claim this credit ... my income is from social security, interest income, and savings ... so i would take $2000 (the maximum), put it in an IRA (i assume ROTH since the $2000 is after tax dollars) and claim the tax credit ... can i do that ?

[VolvoGirl]

Sorry no.  You need earned income from W2 or a net profit from self employment to contribute to either a Traditional IRA or a ROTH IRA.

[runnerdude]

thanks ... i just took the quiz and it says i'm qualified ... question ... i ASSUME i have until april 15th, 2025, to make the $2000 contribution to an IRA for the 2024 tax year ... to get the credit, you have to contribute to an IRA or some other retirement plan ... i answered "yes" when the quiz asked me if i have done that, even though i haven't done it yet ... i assume i have until april 15th, 2025 for the 2024 tax year ... right ??

also, since the $2000 is coming from after tax savings, i should probably put this in a ROTH IRA ... if i put it in a traditional IRA, i'll have to pay tax on the $2000 when i withdraw it, and the tax will probably be more than the credit  ...

am i correct ?

thanks so much !

[runnerdude]

@VolvoGirl thanks ... take a look at my replies to amy ... i just took the quiz and it said i qualify, but that's because i said i contributed to an IRA (even though i haven't done that yet) ... i have until april 15th to do that i believe ... but you are saying i won't be able to even open an IRA (traditional or ROTH) without any earned income ??

so i basically can't get out of the starting gate because without earned income i'm prohibited from contributing to an IRA ...

is that what you are saying ?? thanks so much

[VolvoGirl]

Yes exactly.  And see dmertz post above.  

[VolvoGirl]

I just took that quiz too.  It doesn’t ask if you had earned income from working.  It just assumes you did because you made a IRA contribution and you need earned income to make a contribution.  

[runnerdude]

@VolvoGirl thanks ... it's kind of a catch-22 ... the IRS website says you don't need earned income as a condition to claim the saving's credit ... but good luck trying to  make that retirement savings contribution  WITHOUT earned income ... you can't do it !!

thanks so much

[runnerdude]

@VolvoGirl exactly ... i marked "yes" when it asked if i made an IRA contribution (even though i haven't) ... if i mark "no", it says i'm not eligible for the credit ... i assumed i had until april 15th to invest in the IRA, but without earned income, it's a moot point ... i think i understand all this now ... thanks for your help !