Find out if you're ineligible. You won't be able to claim the saver's credit if you are under 18 years old or were claimed as a dependent on someone else's tax return. Individuals who were enrolled as full-time students during any part of five calendar months during the year are also unable to get the credit. Rollover contributions aren't eligible for the saver's credit, and eligible contributions could be reduced if you have recently taken distributions from a retirement account.
Get the right forms. You'll need IRS Form 8880 to claim this credit, and to attach it to your 1040, 1040A or 1040N when you file your tax return. "Don't use the 1040EZ Form," Collinson cautions. "If you use tax-preparation software, be on the lookout for it so you can be sure to claim it."
Only 23 percent of people with household incomes of less than $50,000 per year, the group most likely to qualify, say they are aware of the saver's credit, according to a 2013 Transamerica Center for Retirement Studies survey. If you're close to the income cutoffs, consider calculating whether or not you could get a tax deduction and credit by putting even a small amount of cash in a retirement account. "Do some modeling with tax-preparation software and see what your tax would look like if you fund the IRA and took the credit or if you did not," Collinson says. "For those that meet the income eligibility requirement, it's really important to take advantage of that."