Form 8880: Your Retirement Saver’s Credit Guide for American Expats 

The IRS announced that income limits for the Saver’s Credit increased for 2025 to $79,000 for married couples filing jointly and $39,500 for singles—meaning more American expats can now claim up to $1,000 ($2,000 if married filing jointly) in tax credits simply for contributing to retirement accounts. Form 8880 lets you claim this Retirement Savings Contributions Credit, and as an American living abroad, you can still qualify even while overseas. 

The bottom line: If your adjusted gross income falls below these new 2025 thresholds, contributing to retirement accounts could earn you a direct dollar-for-dollar tax credit while building your future financial security. Most expats who use the Foreign Earned Income Exclusion will likely qualify. 

What is Form 8880? 

Form 8880 is used by individuals to figure the amount, if any, of their retirement savings contributions credit (also known as the Saver’s Credit). This IRS form calculates a tax credit designed to encourage low- and moderate-income taxpayers to save for retirement. 

Unlike a tax deduction that reduces your taxable income, this credit directly reduces your tax bill. It’s essentially free money from the government for doing something you should already be doing—saving for retirement. 

Why This Matters for American Expats 

As an American living abroad, you’re already dealing with complex tax obligations. The Saver’s Credit provides a bright spot: you can reduce your U.S. tax liability while building retirement savings, regardless of which country you call home. 

Many expats assume they can’t benefit from U.S. retirement incentives while living overseas. That’s simply not true. Whether you’re contributing to an IRA, participating in your overseas employer’s 401(k), or managing both U.S. and foreign retirement accounts, the Saver’s Credit could apply to your eligible U.S. contributions. 

Who Qualifies for the Saver’s Credit? 

To be eligible for the Saver’s Credit, you must be at least 18 years old, not a full-time student, and not claimed as a dependent on someone else’s tax return. Additionally, your adjusted gross income must fall below specific thresholds. 

Age and Status Requirements 

• Age: Must be at least 18 years old by December 31st of the tax year 
• Student status: Cannot be a full-time student for five or more months during the year 
• Dependency: Cannot be claimed as a dependent on anyone else’s tax return 

2025 Income Limits (Verified Official IRS Data) 

For 2025, the income limits are $79,000 for married couples filing jointly, up from $76,500; $59,250 for heads of household, up from $57,375; and $39,500 for singles and married individuals filing separately, up from $38,250. 

Filing Status	50% Credit	20% Credit	10% Credit	No Credit
Single, Married Filing Separately, Qualifying Widow(er)	AGI up to $24,500	$24,501 – $26,500	$26,501 – $39,500	Over $39,500
Head of Household	AGI up to $36,750	$36,751 – $39,750	$39,751 – $59,250	Over $59,250
Married Filing Jointly	AGI up to $49,000	$49,001 – $53,000	$53,001 – $79,000	Over $79,000

How Much Credit Can You Get? 

The credit is 50%, 20% or 10% of the first $2,000 ($4,000 if married filing jointly) that you contribute to eligible retirement accounts, making the maximum credit $1,000 ($2,000 if married filing jointly). 

Credit Calculation Examples 

Example 1: Corporate Expat in Singapore

Sarah, a single filer working in Singapore, has an AGI of $35,000 after taking the Foreign Earned Income Exclusion. She contributes $3,000 to her traditional IRA. Her credit calculation: 

• Eligible contribution: $2,000 (maximum) 
• Credit rate: 10% (based on her AGI) 
• Saver’s Credit: $200 

Example 2: Entrepreneur Couple in Portugal

Mike and Lisa file jointly with a combined AGI of $45,000. They each contribute $2,000 to their IRAs ($4,000 total). Their credit calculation: 

• Eligible contribution: $4,000 (maximum for joint filers) 
• Credit rate: 50% (based on their AGI) 
• Saver’s Credit: $2,000 

Eligible Retirement Accounts 

The Saver’s Credit applies to contributions to traditional or Roth IRAs, 401(k)s, 403(b)s, governmental 457(b)s, SIMPLE IRAs, and SARSEPs. It also includes: 

• Traditional and Roth IRAs 
• 401(k), 403(b), and 457(b) plans 
• SIMPLE IRAs and SARSEPs 
• Federal Thrift Savings Plan (TSP) 
• ABLE accounts (for designated beneficiaries) 

What Doesn’t Count 

Rollover contributions do not qualify for the credit. Only new money going into retirement accounts counts toward the Saver’s Credit. 

The Distribution Reduction Rule 

Here’s where it gets tricky: your eligible contributions may be reduced by any recent distributions you received from a retirement plan or IRA, or from an ABLE account. 

The IRS looks at distributions you received during: 

• The tax year you’re claiming the credit 
• The two preceding tax years 
• The period after the tax year ends until your return’s due date (including extensions) 

This means if you took a $1,000 distribution from your 401(k) in 2023, 2024, or early 2025 (before filing), and you contributed $2,000 to your IRA in 2025, your eligible contribution for the credit would be reduced to $1,000. 

How to Complete Form 8880 

Form 8880 is a straightforward one-page form, but accuracy is crucial. Here’s the step-by-step process: 

Step 1: Gather Your Information 

• Total retirement contributions for the tax year 
• Any distributions from retirement accounts in the current and two preceding years 
• Your adjusted gross income from Form 1040 

Step 2: Complete the Form 

• Lines 1-3: Enter your contributions to different types of retirement accounts
• Line 4: Subtract any distributions from the testing period
• Lines 5-7: Calculate your net eligible contributions (maximum $2,000 per person)
• Line 8: Enter your AGI from Form 1040
• Line 9: Use the form’s table to find your credit percentage
• Lines 10-12: Calculate your final credit amount 

Step 3: Apply Credit Limitations 

The credit cannot exceed your total tax liability. You’ll need to complete the Credit Limit Worksheet if other credits apply to your return. 

Expat-Specific Scenarios 

Using the Foreign Earned Income Exclusion 

If you claim the Foreign Earned Income Exclusion (FEIE), your excluded income doesn’t count toward AGI limits for the Saver’s Credit. This often puts expats in lower income brackets, making them eligible for higher credit percentages. 

Example: John excludes $120,000 in foreign earned income using the FEIE but has $25,000 in U.S. investment income. His AGI is $25,000, qualifying him for the 20% credit rate despite his high overseas salary. 

Multiple Country Retirement Plans 

Many expats contribute to both U.S. and foreign retirement plans. Only contributions to U.S.-qualified plans count for the Saver’s Credit. However, you can often make IRA contributions based on foreign earned income, creating opportunities to claim the credit. 

Late Filers and the Saver’s Credit 

If you’re catching up on unfiled returns, you can still claim the Saver’s Credit for years when you made eligible contributions. The credit can help reduce tax liability on past-due returns, though you cannot receive a refund if the credit exceeds your tax owed (it’s non-refundable). 

Common Mistakes to Avoid 

Exceeding the AGI Limits 

Track your income carefully throughout the year. If you’re close to the AGI threshold, consider maximizing traditional IRA or 401(k) contributions to lower your AGI. 

Forgetting About Distributions 

The two-year lookback rule catches many taxpayers off guard. Before claiming the credit, review all retirement account activity from the current and two preceding years. 

Missing the Filing Deadline 

For 2024 taxes, the tax filing deadline wass April 15, 2025. Unlike most retirement contributions, you cannot claim the Saver’s Credit on an amended return if you miss the original deadline. 

Not Claiming When Eligible 

Many low- and moderate-income taxpayers don’t realize they qualify. The credit is particularly valuable because it’s dollar-for-dollar tax reduction, not just a deduction. 

Maximizing Your Benefit 

Timing Your Contributions 

For IRAs, you have until the tax filing deadline to make contributions for the previous year. This gives you flexibility to optimize both your AGI and credit eligibility after seeing your full year’s income. 

Consider Roth vs. Traditional 

Traditional contributions reduce your AGI (potentially increasing your credit rate), while Roth contributions don’t. However, Roth contributions still qualify for the credit itself. 

Spousal Contributions 

If you’re married, each spouse can qualify for up to $1,000 in credits ($2,000 total) based on contributions of up to $2,000 each. This works even if only one spouse has earned income. 

Future of the Saver’s Credit 

Beginning in 2027, by making annual contributions of up to $2,000 to a 401(k)-type plan or an Individual Retirement Account (IRA), an individual can receive as much as an annual $1,000 Saver’s Match contribution from the Treasury. Unlike the current credit, this will be a direct government contribution to your retirement account. 

This means 2026 is the last year to claim the current Saver’s Credit structure, making it even more important to take advantage of this benefit while it’s available. 

Next Steps 

If you think you might qualify for the Saver’s Credit: 

1. Calculate your 2025 AGI including any exclusions or deductions 
2. Review your retirement contributions for the year 
3. Check for any distributions in 2023, 2024, or 2025 
4. Complete Form 8880 when filing your return 
5. Plan ahead for 2026 to maximize this final year of credits 

The Saver’s Credit represents one of the most valuable tax benefits available to Americans with moderate incomes. As an expat, you’re already dealing with complex tax rules—don’t miss out on this opportunity to reduce your tax bill while building financial security. 

Have questions about the Saver’s Credit or other expat tax matters? If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions on expat taxes or working with Greenback, contact our Customer Champions.

This article provides general information and should not be considered personalized tax advice. Tax laws change frequently, and individual circumstances vary. Always consult with a qualified tax professional for advice specific to your situation.