Saver’s Match Will Pay Up to $1,000, and FEIE Income Still Counts
Treasury and the IRS announced on August 7, 2026, that the Saver’s Match will begin with the 2027 tax year, depositing up to $1,000 a year into eligible taxpayers’ retirement accounts. It is not final and changes nothing on your current return: Notice 2026-48 sets out the rules Treasury and the IRS intend to propose, with comments open through October 5, 2026. The part that matters for Americans abroad is the income test. The match phases out entirely at a modified adjusted gross income of $71,000 for joint filers, $53,250 for heads of household, and $35,500 for everyone else, and that figure is calculated without regard to the foreign earned income exclusion. The same add-back has applied to the Saver’s Credit (Form 8880) for years without changing many outcomes. Money now lands in the account either way, so the test decides who gets paid.
1. The Match Pays 50%, Capped at $1,000
Saver’s Match: A federal payment of up to $1,000 a year that Treasury deposits straight into your retirement account when you contribute to one. It replaces the Saver’s Credit for retirement contributions from the 2027 tax year onward.
- The amount: 50% of the first $2,000 you contribute to retirement in a year, so up to $1,000 per person. Joint filers who both contribute can each earn one.
- The first year: Contributions made during 2027, claimed on a new Form 8880-A with your 2028 filing.
- Where it goes: Into a retirement account you designate, untaxed on arrival.
| Filing status | Full 50% match | Partial match | No match |
|---|---|---|---|
| Married filing jointly or surviving spouse | Up to $41,000 | $41,001 to $70,999 | $71,000 and up |
| Head of household | Up to $30,750 | $30,751 to $53,249 | $53,250 and up |
| Single or married filing separately | Up to $20,500 | $20,501 to $35,499 | $35,500 and up |
The full-match thresholds are indexed for inflation after 2027; the phaseout ranges are fixed. You also have to reach age 18 by the close of the year, and you cannot be a full-time student, a dependent on another return, or a nonresident alien, absent an election to be treated as a resident.
2. Excluded Foreign Income Still Counts
Modified adjusted gross income, for Saver’s Match purposes: Your adjusted gross income recalculated without the exclusions for foreign earned income, Puerto Rico income, and income from Guam, American Samoa, and the Northern Mariana Islands, and with your pre-tax retirement contributions added back in.
Claiming the foreign earned income exclusion on Form 2555 usually lowers the amount that determines what you qualify for. The Saver’s Match tests your income before the exclusion comes off: section 6433 directs that adjusted gross income be determined without regard to section 911, and the foreign housing exclusion gets the same treatment. The IRS states that the calculation adds back “certain excluded foreign income.”
Here is the same single filer at two salaries. Each works abroad for a U.S. employer and defers $2,000 into a 401(k).
On a $72,000 Salary, No Match
The deferral leaves $70,000 of wages, the exclusion removes all of it, and adjusted gross income on Form 1040 lands near zero. Modified adjusted gross income adds back the $70,000 and the $2,000 deferral, for a total of $72,000. That exceeds the $35,500 cutoff, so the match is zero.
On a $20,000 Salary, the Full Match
The same arithmetic gives $18,000 of excluded wages plus the $2,000 deferral, for $20,000. That sits under the $20,500 threshold, so the full 50% applies, and $1,000 goes into the account.
3. A Full Exclusion Leaves Nothing to Match
An IRA contribution cannot exceed your taxable compensation for the year, and amounts you exclude from income, including foreign earned income and foreign housing costs, do not count as compensation. Exclude your entire salary, and your IRA room drops to zero, leaving nothing for the Treasury to match. Deferrals into a U.S. employer’s 401(k), 403(b), or governmental 457(b) escape that limit, and the Foreign Tax Credit on Form 1116 keeps your income where it counts.
4. Withdrawals Reduce What Gets Matched
Section 6433 counts your contributions for the year, then reduces them dollar for dollar by any distributions you took from an IRA or employer retirement plan during a testing period covering that year, the two years before it, and the run-up to your filing deadline. Rollovers do not count against you. For anyone already drawing down a U.S. account, that arithmetic usually leaves nothing to match.
Three points follow if you are retired abroad. Pension and annuity payments are not compensation, so they cannot support an IRA contribution. Social Security benefits come from outside the listed account types, so they do not trigger the reduction. A foreign employer’s pension appears to sit outside that list, too, though the notice does not address it.
One route stays open. File jointly, and if your spouse has compensation includible in gross income, you can fund a spousal IRA on their earnings and earn your own match. That depends on the working spouse’s leaving income unexcluded.
What This Means for Americans Abroad
A Nonrefundable Credit Becomes a Deposit
Section 25B applied the same add-back to the Saver’s Credit for years, and it seldom mattered because that credit is nonrefundable and someone who excluded most of their income had no tax to offset it. Treasury contributes the match whether you owe tax or not, which puts a number on the choice between the exclusion and the credit.
Foreign Accounts and Non-Citizens Unaddressed
The notice does not say where Treasury deposits a match when a taxpayer’s only retirement account is held with a foreign provider, and the statute names only U.S. plans and IRAs. The Office of Legal Counsel has also concluded that these contributions are federal public benefits under the 1996 welfare reform law, restricting eligibility for some non-citizens.
How You Handle Foreign Income Decides This
- Working abroad on a U.S. payroll: Your deferrals qualify, but pre-exclusion salary is the figure tested.
- Excluding all of your foreign salary: Confirm you can contribute before you check the limit.
- Claiming the Foreign Tax Credit: Neither constraint applies, so only the threshold matters.
- Drawing on a U.S. retirement account: Withdrawals offset contributions across three years.
Steps to Take Now
- Run the number on pre-exclusion income: Take your gross foreign earnings before Form 2555, add back pre-tax contributions, and check the table above.
- Reopen the exclusion-versus-credit decision for 2027: If you sit near the threshold, the credit route can preserve both eligibility and IRA capacity.
- Check your withdrawal history before you contribute: Distributions from the two prior years still count against you.
- Confirm a U.S. account can receive the deposit: An existing IRA or a 401(k) you left behind can take it.
- Claim the Saver’s Credit on your 2026 return if you qualify: 2026 is the last year it covers retirement contributions; from 2027 it applies to ABLE accounts only.
- Comment by October 5, 2026, if the foreign account gap affects you: Comments go through regulations.gov, and a tax professional who works with Americans abroad can help you frame it.
SECURE 2.0 Set This Up Four Years Ago
Congress created the Saver’s Match in the SECURE 2.0 Act of 2022, adding section 6433 to the tax code with a four-year runway. Executive Order 14403, issued April 30, 2026, directed the agencies to act on retirement savings access, and Treasury and the IRS responded with release IR-2026-89 on August 7, 2026. Proposed regulations and the final Form 8880-A follow the comment period, leaving a full year to get positioned.
Get Your Retirement Contributions Right
This article describes a notice of intent to issue proposed regulations. Those regulations are not final, and the rules described may change before they take effect. All figures for current law reflect rules in effect as of publication. The information in this article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are complex and change frequently. Consult a qualified tax professional regarding your specific situation before taking any action.
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