s who make contributions to retirement plans administered by their employers may be eligible to claim the Retirement Savings Contributions Credit, also known as the Saver's Credit, on their federal income tax returns. This credit allows qualified taxpayers to receive a tax credit based on the amount they contribute to their retirement plan during the tax year. While it is relatively easy to file for the Saver's Credit, meeting the qualifications to claim it can be a bit tricky.

What is the Saver's Credit?

The Saver's Credit was established to help low-income taxpayers make contributions to IRAs, 401(k)s, and other employer-provided retirement plans. Originally enacted as a temporary provision in 2002, the credit became a permanent provision in 2006.

Under the Saver's Credit, taxpayers receive a tax credit based on their IRS filing status, adjusted gross income, and overall tax liability. It is important to note that the credit is nonrefundable, which means that it can only reduce the total tax liability owed. Any excess credit left over cannot be issued as a refund. The Saver's Credit is unique in that it is one of the few tax credits that is available to couples who file separate returns. Those who want to claim the credit must do so by filing Form 8880 along with their federal return.

2013 Saver's Credit Limits

Every year, the IRS adjusts the amounts of the income limits to keep pace with inflation. The limits for claiming the credit are as follows:

• For married people who file jointly: $59,000
• For heads of households: $44,250
• For single and married people who file separately: $29,500

These limits reflect the highest amounts taxpayers can make and still remain eligible to claim the Retirement Savings Contributions Credit. While these amounts are adjusted for annual inflation, the maximum credit itself remains the same. The most any taxpayer can receive is $2,000 for joint filers and $1,000 for all other filers.

Eligibility Requirements for the Credit

In addition to meeting the income requirements, taxpayers must meet a few other standards in order to take advantage of the credit opportunity. They must be at least 18 years of age and not be considered a full-time student. For IRS purposes, a person is considered a full-time student if he or she takes a full course load for at least five months out of the year. A person who wants to claim the credit must also not be claimed as a dependent by another taxpayer.

The Retirement Savings Contributions Credit can help you afford your retirement contributions a bit easier. If you meet the income standard and you're contributing to a qualified retirement plan, be sure to find out how your personal tax planner can help you save for retirement while keeping Uncle Sam happy.