How to Lower Your 2025 Taxes with 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 2025 tax return.
There is there’s still time to lower your tax liability, or 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 until Tax Day.
“This creates an opportunity to lower your tax liability even after the year is over,” Colleen Carcone, director of wealth planning strategy at TIAA Wealth Management, explained in an email to Money. “The deadline for filing the previous year’s tax contributions gives you additional months to assess your tax situation, review your income, calculate your potential tax liability and make strategic contributions.”
Besides lowering your taxable income, there are several benefits to adding to your IRA now. Read on to find out what you need to know about last-minute IRA contributions.
How do I reduce my 2025 taxes with IRA contributions?
Every year, the IRS sets a maximum amount for how much you can contribute to your retirement accounts. The most you can contribute to an IRA in 2026 — both traditional and Roth — is $7,500. If you will be 50 or older at the end of this year, you can make an additional $1,100 in “catch-up” contributions.
But what we’re talking about here are the slightly lower IRA contribution limits for 2025, since the taxes you’re technically filing are from last year.
Only traditional IRAs can reduce taxable income. With a Roth IRA, you contribute after-tax dollars, which means you can’t take anything out.
Traditional IRA contributions reduce your taxable income dollar for dollar, and if you contribute enough, can put you in a lower tax bracket. This can lower your 2025 tax bill and result in more money on your tax refund. Last-minute IRA contributions can also help taxpayers qualify for income tax deductions, such as “high bonus” deductions, Carcone added.
How do you know how much to save in a traditional IRA? To generate a rough estimate when preparing your tax return, multiply your estimated tax rate by the amount you contributed to your IRA. For example, if you have a 22% tax rate and contribute the maximum $7,000 in 2025, you will save about $1,540.
However, keep in mind that some exceptions may limit the amount you can withdraw. If you have income above a certain level and you and your spouse have a workplace retirement plan, for example, you won’t be able to claim the full deduction.
On the flipside, you can deduct all of your IRA contributions up to the limit if you don’t do it have a workplace plan.
Tax deductions for 2025 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 adjusted gross income (MAGI).
|
Fill condition |
Adjusted net income |
Deduction of money |
|---|---|---|
|
Single or head of household |
$79,000 or less |
Full deduction up to the amount of your contribution limit |
|
Single or head of household |
Over $79,000 but under $89,000 |
Partial deduction |
|
Single or head of household |
$89,000 or more |
No deductions |
|
Married widow filing jointly or eligible |
$126,000 or less |
Full deduction up to the amount of your contribution limit |
|
Married widow filing jointly or eligible |
More than $126,000 but less than $146,000 |
Partial deduction |
|
Married widow filing jointly or eligible |
$146,000 or more |
No deductions |
|
Spouses file separately |
Less than $10,000 |
Partial deduction |
|
Spouses file separately |
$10,000 or more |
No deductions |
The following table shows the 2025 IRA deduction limits if you and/or your spouse are not covered by a workplace retirement plan.
|
Fill condition |
Adjusted net income |
Deduction of money |
|---|---|---|
|
Single, head of household or window(er) |
Any amount |
Full deduction up to the amount of your contribution limit |
|
A spouse files jointly or separately with a spouse who is not covered by the occupational retirement plan |
Any amount |
Full deduction up to the amount of your contribution limit |
|
Spouses file jointly with a spouse who is covered by a workplace retirement plan |
$236,000 or less |
Full deduction up to the amount of your contribution limit |
|
Spouses file jointly with a spouse who is covered by a workplace retirement plan |
More than $236,000 but less than $246,000 |
Partial deduction |
|
Spouses file jointly with a spouse who is covered by a workplace retirement plan |
$246,000 or more |
No deductions |
|
Married couples file separately with a spouse who is covered by a workplace retirement plan |
Less than $10,000 |
Partial deduction |
|
Married couples file separately with a spouse who is covered by a workplace retirement plan |
$10,000 or more |
No deductions |
Opening an IRA usually takes minutes and can be done online or at a brick-and-mortar location. Savers can set up IRAs through mutual fund companies and banks. Once you’ve opened an account, you can transfer money directly from your bank account to the donation limit until the tax filing deadline. You can also pay for your IRA with cash or check, or roll over a 401(k) or IRA from another provider.
You don’t have to fund your IRA all at once – you can set up a contribution plan to contribute a certain amount every year. When you file your tax return, you can claim a deduction and potentially reduce your taxable income.
This story was originally published in 2024. Updated with new information for 2026.
More from Mali:
8 Best Tax Help Companies for February 2026
How To File Your Taxes For Free This Year
Here are the Income Tax Brackets for this year
