How to Lower Your Taxable Income With Last-Minute IRA Contributions

The tax filing deadline is coming up on April 15, but it’s not too late to reduce what you owe on your 2024 federal income tax return.

There’s still time to lower your tax bill, or even increase your refund, while contributing to your retirement savings. If you have a traditional individual retirement account, or IRA, you can put money into it for the previous year right up to Tax Day.

Aside from potentially lowering your taxable income, there are a few benefits to adding to your IRA now. Keep reading to find out what you need to know about last-minute IRA contributions.

How do I lower my 2024 taxes with IRA contributions?

Every year, the IRS sets maximums for how much you can contribute to your retirement accounts. The most you can put into an IRA in 2025 — both traditional and Roth — is $7,000. If you’ll be 50 or older by the end of this year, you can make an extra $1,000 in “catch-up” contributions.

But what we're talking about here are the 2024 IRA contribution limits, since the taxes you're filing are technically for last year.

Only traditional IRAs can lower your taxable income. With a Roth IRA, you contribute after-tax dollars, which means you aren’t able to deduct anything.

Traditional IRA contributions reduce your taxable income dollar for dollar, and if you contribute enough, they may drop you into a lower tax bracket. This can lower your 2024 tax bill and lead to you getting more money back in your tax refund.

How do you know how much you’ll save from traditional IRA contributions? To generate a rough estimate while you’re preparing your tax return, multiply your marginal tax rate by the amount you put into your IRA. For example, if you have a 22% tax rate for 2024 and contribute the $7,000 maximum, you’d save about $1,540.

Keep in mind, though, that some exceptions can limit the amount you're able to deduct. If you have income over a certain level and you and your spouse have a workplace retirement plan, for example, you won’t be able to get the full deduction.

On the flipside, you may be able to deduct all your IRA contributions up to the limit if you don’t have a workplace plan.

Tax deductions for 2024 IRA contributions

Let’s say you or your spouse are enrolled in an employer retirement plan such as a 401(k). The table below will show you how much the IRS will allow you to deduct based on your modified adjusted gross income (MAGI). If you file separately and didn’t live with your spouse in 2024, the IRS considers you single.

The following table shows the 2024 IRA deduction limits if you and/or your spouse are not covered by a workplace retirement plan.

Opening an IRA typically takes minutes and can be done online or through a brick-and-mortar institution. Savers can set up these IRAs through mutual fund companies as well as banks. Once you've opened an account, you can transfer money directly from your bank account up to the contribution limit up to the tax filing deadline. You can also fund your IRA with cash or check, or roll over a 401(k) or an IRA from another provider.

You don't have to fund your IRA all at once — you can set up a contribution schedule so that you contribute a certain amount regularly throughout the year. When you file your tax return, you can then claim a deduction and potentially lower your taxable income.

This story was originally published in 2024. It was updated with new information for 2025.

More from Money:

The IRS Is Resuming Debt Collections. Here's What to Do if You Can't Pay Your Taxes

How to File Taxes for Free This Year

10 Best Tax Software