Ministers and spouses may be eligible to receive a credit of up to $1,000 ($2,000 if filing jointly) on federal taxes for 2022 contributions to workplace savings accounts like the Nazarene 403(b) Retirement Savings Plan.
The Saver’s Credit serves as an incentive to mid-to-low income individuals to set aside money for retirement. To be eligible, a participant must be: at least 18 years old in the year for which the claim is made, not a full-time student, and cannot be claimed as a dependent on another person’s tax return. Beyond this, adjusted gross income (AGI) cannot be more than:
- $68,000 if a married joint filer;
- $51,000 if a head of household filer; and
- $34,000 for any other filing status.
Calculating the credit is relatively simple. The credit is worth 50%, 20% or 10% of a maximum contribution of $2,000 ($4,000 if married and filing jointly).
Let’s say you earn $19,000 as a single filer, and you contribute $1,000 to an eligible account. The value of your Saver’s Credit would be $500. If you managed to contribute $5,000 to an eligible account, your credit would be worth $1,000, due to the cap.
If your contribution was made to the Nazarene 403(b) Retirement Savings Plan or other account that offers a tax deduction for contributions, taxable income would also be reduced by the amount of the contribution. The greater a filer’s income, the lower the amount of the credit. The accompanying chart shows how this works.
| Credit Rate | Married Filing Jointly | Head of Household | All Other Filers* |
|---|---|---|---|
| 50% of your contribution | AGI up to $41,000 | AGI up to $30,750 | AGI up to $20,500 |
| 20% of your contribution | $41,001 to $44,000 | $30,751 to $33,000 | $20,501 to $22,000 |
| 10% of your contribution | $44,001 to $68,000 | $33,001 to $51,000 | $22,001 to $34,000 |
*Single, married filing separately, or qualifying widow(er)
Note that a “credit,” unlike a “tax deduction,” reduces the actual tax bill dollar-for-dollar.
For ministers, housing allowance is not included in determining AGI, which may enable eligibility or further increase the amount of the credit.
Only voluntary contributions are eligible for the tax credit, and the amount of contributions eligible may be affected by distributions received from the account during the year. You’ll find the credit Form 8880 and more details here.
Even if you cannot take advantage of this credit for the 2022 tax year, now is a good time to start investing or increase the amount of contributions to your Nazarene 403(b) Retirement Savings Plan account. To enroll, phone Pensions and Benefits USA at 888-888-4656 or email pensions@nazarene.org.