The Saver's Tax Credit for Musicians

The Saver’s Tax Credit

Many of the professional musicians I work with are self-employed and don’t have access to a 401(k) or company retirement plan. Not surprisingly, saving for retirement is a not always a high priority for most young musicians. Still, getting an early start and saving regularly are the best path to financial security. What if you could get the government to pay you back $1000 when you invest $2000 into an IRA? Would that make it easier?

Today, I want to share information about the Tax Credit for Qualified Retirement Savings Contributions, commonly known as the Saver’s Credit, and give you my top strategies for how musicians can make the most of this valuable credit. There are a lot of musicians who are eligible for the Saver’s Tax Credit and are missing out!

The credit is calculated on IRS Form 8880, and gets entered on your Form 1040 tax return. To qualify for the tax credit, you need to be over 18, not a full time student, and not listed as a dependent on someone else’s return. For your 2021 taxes, your Adjusted Gross Income (1040 line 11) must be below $33,000 (single), $49,500 (head of household), or $66,000 (married filing jointly). You can receive the credit for contributions made to almost any retirement account, including a traditional or Roth IRA, 401(k), 403(b), 457 plan, SEP IRA, or SIMPLE IRA. The maximum contribution eligible for a credit is $2,000 per person.

To calculate the tax credit you will receive credit, use the income table below to find your “multiplier”. The multipliers are 0.5, 0.2, and 0.1, which on a $2,000 contribution equals a maximum tax credit of $1,000, $400, or $200. The credit is “non-refundable” – which does not mean you will not get a refund – but that the credit cannot take your tax liability to less than zero.

Once you calculate your adjusted gross income for 2021, find your multiplier here:

2021 Saver’s Credit, Adjusted Gross Income

Multiplier Married filing jointly Head of Household Single
0.5 up to $39,500 up to $29,625 up to $19,750
0.2 $39,501 – $43,000 $29,626 – $32,250 $19,751 – $21,500
0.1 $43,001 – $66,000 $32,251 – $49,500 $21,501 – $33,000
no credit over $66,000 over $49,500 over $33,000

Planning Strategies

1) If you are trying to decide between a Roth or Traditional IRA (or 401(k)), remember that the Traditional IRA or 401(k) contribution will lower your Adjusted Gross Income (AGI). For example, if you are married with an AGI of $40,000, a $2,000 contribution to a Traditional IRA would lower your AGI to $38,000, making you eligible for a $1,000 credit. If you instead contribute to a Roth IRA, the credit at a $40,000 AGI would be only $400. So, be sure to calculate if contributing to a Traditional plan could enable you become eligible for a larger credit.

2) For married couples, note that the credit is per person. If you are married, filing jointly, and eligible for the credit, you would be smarter to contribute $2,000 per person rather than $4,000 to the IRA of one spouse. That way you will receive two credits.

If the second spouse is not employed, it’s okay, they can contribute to a Spousal IRA. They do not need to have earned income of their own to make a contribution to an IRA or to receive this tax credit.

3) There are no age limits to IRA contributions today. If you have any earned income, you may still be eligible for the tax credit by contributing to your IRA. If you are “retired” and playing an occasional gig, consider this: a $2,000 contribution to a Roth IRA might bring you a $200, $400, or $1,000 tax credit. And as long as you’ve had a Roth for five years, you can take that money out tax-free at any time.

4) If your adult children are out of school, but have an income that would qualify for the credit, consider helping them fund an IRA. Besides giving them a tax deduction and a tax credit, it can be a valuable introduction and education to the importance of saving, investing, starting retirement planning early.

IRS website: 2021 and 2022 Retirement Savings Contributions Credit

If you are a professional musician and have questions about finances, taxes, investing, and retirement planning, I am here to help. Set up a call today on the Appointment Tab here. My hope is that even if you make too much for this credit, you can share this information with other musicians and encourage them to start contributing to their own IRA.


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  1. […] your Adjusted Gross Income is below $30,750 (single) or $61,500 (married), you may be eligible for The Saver’s Tax Credit when you contribute to an IRA or other retirement […]