Saving on your taxes while boosting your retirement savings? Sounds like a win-win. If you missed contributing to an IRA last year, there’s good news—you may still be eligible to make a deductible IRA contribution for the previous tax year. But you’ll need to act fast because the clock is ticking.
This blog walks you through everything you need to know about retroactive IRA contributions, how to maximize your tax savings, and what steps to take to ensure you're fully compliant with IRS regulations.
An IRA deduction refers to the amount you can deduct from your taxable income for contributions made to a traditional IRA within the specified limits. The purpose? To incentivize people to save for retirement while reducing their current tax burden. The deduction is available for individuals who meet specific income and participation criteria, as set by the IRS.
Here’s the kicker—you don’t need to have made the contribution last year to qualify for last year’s deduction. Provided you meet IRS deadlines, you can make that contribution up until the tax filing deadline (usually April 15) and still claim it for the previous year.
Why Does This Matter?
Before making a deductible IRA contribution for the prior year, ensure that you meet the eligibility requirements. Here’s a quick checklist to guide you.
Good news—since the SECURE Act of 2019 came into effect, there is no age limit for contributing to a traditional IRA. Whether you're 25 or 75, you're eligible to contribute as long as you have earned income.
You must have earned income from wages, salaries, commissions, or self-employment income to qualify for an IRA deduction. Unearned income, like dividends or rental income, won’t count.
Your eligibility might be affected if you're covered by a retirement plan at work, as the IRA deduction phases out at higher income levels. For contributions made for the 2024 tax year, here’s how the phase-out works:
Keep these limits in mind to figure out if you qualify for a full, partial, or no deduction.
The total amount you can contribute to an IRA for any given year (2024 included) is $6,000 ($7,000 if you’re 50 or older), subject to earned income.
Taking advantage of this opportunity might sound complicated, but it’s easier than you think. Here’s a step-by-step guide to get you started.
The deadline for retroactive IRA contributions aligns with the federal tax filing deadline, typically April 15. For contributions tied to the 2024 tax year, ensure your contribution is made by April 18, 2025 (since Tax Day falls on a Tuesday this year).
Pro tip: Even if you file for a tax extension, the contribution deadline for prior-year contributions remains firm—April 18 in this case.
If you already have a traditional IRA, confirm that it is eligible for tax-deductible contributions. If not, you may first need to open an account with a financial institution that offers IRAs.
Check brokerage options like Fidelity, Vanguard, or TD Ameritrade for affordable, reliable options to open an IRA.
When making your payment deposit or contribution, make a clear written designation that the funds are for last year’s tax year (e.g., 2024). Inform your IRA custodian about this detail to avoid confusion.
Document your contribution details thoroughly. Keep receipts, account statements, and confirmation of the tax year designation for your records. This information will be critical when preparing your taxes.
Procrastinating on retirement savings is common, but taking advantage of retroactive IRA contributions can undo past delays. Here’s why acting NOW is so crucial:
A. Roth IRAs work differently—contributions are made with after-tax dollars and don’t qualify for deductions. However, the tax-free growth and withdrawals for Roth IRAs make them incredibly attractive for long-term planning.
A. Possibly. The phase-out depends primarily on your adjusted gross income (AGI) and whether you or your spouse are covered by a retirement plan.
A. Absolutely. Many institutions allow you to set automated monthly contributions to maintain consistent savings habits without the hassle of manual management.
Maximizing your IRA contributions and deductions isn’t just about saving for retirement—it’s a smart tax strategy that grows your wealth over time. By leveraging IRS rules that allow retroactive contributions, you can make up for lost time and give your future self a financial advantage.
At SD Mayer & Associates, we specialize in strategies like this to ensure our clients maximize their financial opportunities while staying compliant. If you’d like help calculating your deduction, understanding tax implications, or even opening an IRA, our team of experts is just a click away.
Your next step? Don’t wait. Contribute to your IRA today, claim your deduction for last year, and invest in the future you deserve.