Lower Your 2024 Tax Bill with an IRA Contribution
- Steve Julal
- Feb 19
- 2 min read
If your 2024 tax bill is higher than expected, there’s still time to lower it. Eligible taxpayers can make a deductible contribution to a traditional IRA up until the April 15, 2025, filing deadline, to potentially lower their taxable income for the 2024 tax year.
Who Can Contribute?
You may qualify for a deductible contribution to a traditional IRA if:
Neither you nor your spouse is an active participant in an employer-sponsored retirement plan, or
You or your spouse participate in an employer plan, but your modified adjusted gross income (MAGI) is within specific limits.
For 2024, the deduction phases out as follows:
Married filing jointly (covered by an employer plan): MAGI between $123,000 and $143,000.
Single or head of household: MAGI between $77,000 and $87,000.
Married filing separately: MAGI between $0 and $10,000.
Spouse not covered by a plan but married to a covered participant: MAGI between $230,000 and $240,000.
Benefits and Considerations
A deductible IRA contribution can lower your taxable income, and your earnings grow tax deferred. However, withdrawals are taxed as ordinary income and may incur a 10% penalty if taken before age 59½ unless an exception applies.
Traditional IRAs differ from Roth IRAs. While Roth IRA contributions are not deductible, qualified withdrawals are tax-free if the account has been open for at least five years and you’re 59½ or older. Income limits apply to Roth IRA contributions, and the deadline to contribute is also April 15, 2025.
Spousal IRA Contributions
If you’re married and do not have earned income, you may still be able to contribute to a traditional IRA using your spouse’s income. This option, known as a spousal IRA, allows non-working spouses to benefit from tax-advantaged retirement savings.
Contribution Limits
For 2024, eligible individuals can contribute up to:
$7,000 ($8,000 if age 50 or older) to a traditional IRA.
$69,000 to a Simplified Employee Pension (SEP) plan, increasing to $70,000 in 2025. Business owners can contribute to a SEP until their tax return due date, including extensions.
Maximizing Your Retirement Savings
If you’re interested in maximizing your tax-advantaged retirement contributions, consult a financial professional. We can help you explore IRAs, SEPs, and other tax-favored retirement strategies while preparing your return.
