If you’re preparing to file your 2024 federal income tax return and your tax bill is higher than expected — or your refund is smaller than hoped — there might still be an opportunity to change that.
If you qualify, you can make a deductible contribution to a traditional IRA up until the filing deadline of April 15, 2025, and benefit from the tax savings on your 2024 return.
Who’s Eligible?
You can make a deductible contribution to a traditional IRA if:
- You (and your spouse, if married) aren’t active participants in an employer-sponsored retirement plan, or
- You (or your spouse) are active participants, but your modified adjusted gross income (MAGI) doesn’t exceed certain limits (based on filing status).
2024 Deduction Phaseout Ranges
- Married, filing jointly, covered by a plan:
Deduction phases out between $123,000 – $143,000 MAGI - Single or head of household:
Phaseout range is $77,000 – $87,000 MAGI - Married, filing separately:
Phaseout range is only $0 – $10,000 MAGI - Not an active participant, but spouse is:
Deduction phases out between $230,000 – $240,000 MAGI
Tax Treatment
- Deductible traditional IRA contributions reduce your current tax liability, and earnings grow tax-deferred.
- However, distributions are fully taxable and subject to a 10% early withdrawal penalty if taken before age 59½, unless an exception applies.
Roth IRAs
You may also contribute to a Roth IRA until April 15, 2025, but:
- Contributions are not deductible
- Income limits apply
- Withdrawals are tax-free if:
- The account has been open at least five years, and
- You’re age 59½ or older
Certain early withdrawals from Roth IRAs may also be tax-free under specific conditions.
How Much Can You Contribute?
- Traditional IRA Contribution Limits for 2024:
- Up to $7,000 per person
- Up to $8,000 if you’re age 50 or older by December 31, 2024
- SEP (Simplified Employee Pension) Plan Contributions:
- Available to small business owners
- Can be made up until your tax return due date (including extensions)
- Maximum SEP contribution for 2024: $69,000
Let’s Talk Strategy
Contact our office for more information about IRAs, SEPs, or other tax-saving strategies. During your tax preparation appointment, we can also help you maximize your retirement contributions and reduce your 2024 tax bill.
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