Savers Credit The Saver's Credit provides a nonrefundable tax credit for contributions made by eligible, low income taxpayers to IRAs and qualified elective income deferrals. The plan provides incentives for lower income individuals to save for their retirement through available qualified plans. To qualify, the taxpayer must have reached the age of 18 by the close of the year and cannot be a full-time student or dependent of another.The credit ranges from 10% to 50% of the first $2,000 contributed by each taxpayer to a qualified plan during the year. The credit gradually phases out as a taxpayer’s modified AGI increases. This phase out is inflation adjusted from year to year, and the phase outs are included in a link accessed below:CLICK HERE FOR THE CREDIT PHASE-OUT TABLESModified AGI - Adjusted gross income is determined without regard to foreign and protectorate income exclusions or foreign housing exclusions.The credit is nonrefundable and offsets alternative minimum tax liability as well as regular tax liability.Example – Eric and Heather are married and file a joint return. Eric contributed $3,000 through his 401(k) plan at work, and Heather contributed $500 to her IRA account. Their modified AGI for the year was $30,000. The credit is computed as follows: Eric and Heather file a joint return using the standard deduction for married couple and their tax for the year is computed as follows: Caution – To prevent taxpayers from withdrawing contributions from existing plans, and subsequently recontributing the funds in order to qualify for the credit, Congress built-in a two-year look back period that generally reduces a taxpayer's current year contribution by withdrawals during the look-back period.