Details of Public Law 119-21, section 70116 , One Big Beautiful Bill Act

Federal law provides a nonrefundable tax credit for eligible taxpayers for qualified retirement savings contributions. The maximum annual contribution eligible for the credit is $2,000 per individual. The credit rate depends on the adjusted gross income of the taxpayer.

The provision permanently allows designated beneficiaries of ABLE accounts to claim the saver’s credit for contributions made to the designated beneficiaries’ ABLE account. This provision was set to expire under the Tax Cuts and Jobs Act (Public Law 115-97, section 11024(b)), for contributions made before January 1, 2026. The provision also increases the credit amount to $2,100 for taxable years beginning after December 31, 2026.

In addition, the new federal law extended the date for all other eligible qualified retirement contributions, for the credit, from before January 1, 2026, to before January 1, 2027. Impacted contributions include (1) elective deferrals to an IRC section 401(k) plan, an IRC section 403(b) plan, a governmental IRC section 457 plan, a SIMPLE plan, or a SARSEP; (2) contributions to a traditional or Roth IRA; and (3) voluntary after-tax employee contributions to a qualified retirement plan or IRC section 403(b) plan.

California does not conform to the saver’s credit under IRC section 25B and has no comparable credit. As a result, California does not conform to the changes made by this provision.