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Retirement savings contribution credit.
Most music teachers never intend to retire because they love teaching. But the harsh reality is that some never intend to retire because they can't afford to.
Congress is aware of how difficult it is during these trying economic times for people to set aside money for retirement. On the practical side, many people, especially early in their careers, simply do not have enough discretionary income available to invest more than a small amount of current income for retirement. Congress realizes that the best way it can make it easier for people to put more toward their retirement is to alleviate some of their budgetary constraints, such as taxes.
Therefore, beginning in 2002, Congress has provided you with a tax credit--a dollar-for-dollar deduction from the taxes you owe--for Qualified Retirement Savings Contributions. The credit can be as much as 50 percent of your total qualified contribution, up to a maximum of $1,000 per individual. This credit is in addition to your existing tax deductions and deferrals, if any.
Your exact credit amount is equal to an applicable percent of the amount you contribute to your employer's qualified retirement savings plan. That percent is based on your adjusted gross income. As a result, certain individual's contributions to IRAs or employer-sponsored retirement plans may actually be financed through the very tax savings they generate.
For example, consider a married music teacher with no dependents who, before making any retirement contributions, has an ...
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