Save and Invest

House Democrats’ budget plan aims to make up to $500 of the saver’s credit refundable—here's who would qualify


As part of the $3.5 trillion federal budget plan, House Democrats proposed a few measures that would reward those saving for retirement, including a potential update to the saver's credit, which is intended to benefit low- to moderate-income workers contributing to retirement plans.

Under current law, eligible individual taxpayers with an adjusted gross income of $19,750 or less can claim 50% of the first $2,000 contributed to a qualified retirement account, for a maximum credit of $1,000. Married couples filing jointly with an income of $39,500 or less can claim 50% of the first $4,000 they contribute, for a maximum credit of $2,000.

At higher incomes, the percentage taxpayers can claim declines. Individuals earning between $19,751 and $21,500 can claim 20% of their contribution, while those earning $21,501 to $33,000 can 10% of their contribution. The credit phases out completely for individuals earning more than $33,000 and couples earning more than $66,000.

Currently, the saver's credit is nonrefundable, which means that while the credit can reduce taxes owed, it can't be provided as a refund. This doesn't help many in need, especially those with low incomes who owe little to no taxes.

But changes may be coming. If passed, the House Ways and Means Committee's proposed provision would expand the credit's current income parameters and allow for up to $500 of the credit to be refundable for certain taxpayers.

Here's a closer look at the proposed changes and how to know if you'd qualify.

Who would qualify

Savers qualify for the credit based on two factors: Their income level and their retirement contribution amount.

Income level

If the federal budget plan passes, the House Ways and Means Committee provision would raise the maximum income level eligible for the saver's credit.

Individuals with an income of $25,000 or less and married couples filing jointly with an income of $50,000 or less would be able to claim 50% of their qualified retirement contributions. The credit would phase out completely for individuals earning $35,000 or more and married couples earning $70,000 or more.

Contribution amount

The provision would also make part of the credit refundable, which differs from the current law.

Under the new proposal, savers could receive up to $500 as a deposit in their retirement account after they claim the credit on their tax return. Even taxpayers with little to no tax liability would be eligible to recieve the refund in their retirement account.

To be eligible for the $500 refund, eligible savers must contribute at least $1,000 to retirement savings.

Though these changes would potentially help those eligible, nothing is set in stone yet. Lawmakers still must vote on the federal budget plan before any provisions, including that of the saver's credit, are set.

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