If your IRA contribution is to a traditional account, you may be able to get a double tax break. In addition to the saver's credit, look into whether you're eligible to deduct your IRA contributions on the front page of your 1040 or 1040A. This tax break is one of several adjustments to income that are available to all taxpayers, regardless of whether itemizing or taking the standard deduction, and the IRS says you can claim both the retirement savings credit and deduction for your IRA contributions.

The credit also is attractive to workers who are eligible to participate in a 401(k) plan but who earn just over one of the saver's credit income limits. By signing up for a company-sponsored account, such workers could get under the earnings cap while simultaneously boosting the potential credit amount.

Take, for example, a married employee who is the sole earner in her family and who reports adjusted gross income of $34,000 on her joint tax return. She's already eligible for a partial credit, but by contributing $2,000 to her 401(k), she will knock her income down enough to take the maximum credit.

Some other restrictions apply
In addition to the income limits, there are a few other restrictions on who can claim the saver's credit. A taxpayer who was younger than 18 last year, a full-time student or claimed as a dependent on another's tax return can't take the retirement savings break.

The saver's credit is also what the IRS calls nonrefundable. That means you can use it to reduce your tax bill to zero, but you can't take advantage of any excess credit amount to get a refund. So if you owe no taxes, the credit is of no use to you.

Still, even if you can't take full advantage of the credit, it's not too shabby of a break when you take into account the additional tax savings you get by contributing to a retirement account in the first place.

Just remember, the key to this credit is participation in retirement accounts. If you haven't opened a retirement account yet, or have one but haven't contributed for the 2008 tax year, you have until the April 15 tax-filing deadline to open one and put in money. The deadline is the same for either a Roth or traditional IRA.

As for your 401(k), you're locked into your credit for the 2008 tax year based on the contributions you made last year. Make sure the W-2 you got from your company reflects the correct amount of all your pension contributions so that you can get the maximum credit.

If you're not yet participating in your company plan, you can improve your future saver's credit potential by signing up as soon as you're eligible. Then contribute as much as you can afford without doing major cash-flow damage to your paycheck. It could pay off at tax-filing time, as well as when you retire.

Freelance writer Kay Bell writes Bankrate's tax stories from her Austin, Texas, home. She also writes two tax blogs, Eye on the IRS for Bankrate and Don't Mess With Taxes, and is the author of the book "The Truth About Paying Fewer Taxes."