November 2024, Make Your Plan -
Most tax-related activity had to be completed by year-end to affect taxable income for 2024. However, there are a few ways individuals can still reduce their taxable income for last year, and they do not require extensive tax planning. These tax deductions are allowed whether you use standard or itemized deductions. Commonly called “above-the-line” deductions, these are captured on your IRS Form 1040 Schedule 1 as Adjustments to Income, and they must be made by the tax filing deadline on April 15, 2025.
Tax year 2024 income limits for Traditional IRA deductibility
(Roth IRA contributions are not tax-deductible.)*
| Filing Status* | Covered By Retirement Plan at Work | Deductibility Based on Adjusted Gross Income (AGI) |
|---|---|---|
| Single/Head of Household | No | Full |
| Yes | Full: $77,000 or less | |
| Phased out: >$77,000 to <$87,000 | ||
| Married Filing Jointly | Neither you nor your spouse | Full |
| You are not, but your spouse is | Full: $230,000 or less | |
| Phased out: >$230,000 to <$240,000 | ||
| You are | Full: $123,000 or less | |
| Phased out: >$123,000 to <$143,000 |
* Consult IRS rules or a tax professional if your status is married filing separately or qualifying widow(er).
Maximum contributions for tax year 2024
| Account Type | Maximum Contribution | |
|---|---|---|
| Individual | Family | |
| IRA* | $7,000 ($8,000 if age 50 and older) | Full: $77,000 or less |
| SEP-IRA† | 25% of compensation (up to $69,000) | Phased out: >$77,000 to <$87,000 |
| HSA‡ | $4,150 | $8,300 |
* Contributions to Roth IRA are subject to income limitations and are not tax-deductible.
† The plan is funded solely by the employer.
‡ Only available to those participating in a high-deductible health plan (HDHP).
There’s still time to make a $7,0001 ($8,000 if age 50 or older) contribution to your IRA for the 2024 tax year. You may be able to deduct some or all of the amount of the contribution depending on your income level and if you (or your spouse) are covered by a retirement plan at work.
With a spousal IRA contribution, you could possibly double up the amount of your deduction.
Generally, you must have earned income to contribute to an IRA. However, if your spouse doesn’t earn income or has very little compensation, they can fund their own IRA up to the contribution limit based on your compensation if you file a joint income tax return. This is known as a spousal IRA contribution. While your combined IRA contributions can’t exceed your combined income, you could possibly double up the amount of your deduction depending on the limits outlined in the previous table (see Tax year 2024 income limits for Traditional IRA deductibility).
Small business owners and self-employed individuals may use a Simplified Employee Pension (SEP) plan to save for retirement. Each eligible employee, including the business owner, has an individual SEP-IRA under the plan that is funded solely by the employer. The contribution limits are quite generous at 25% of compensation (up to $69,000) for tax year 2024. The contribution amount is tax-deductible for the employer and offers an opportunity to reduce tax liability by a significant amount, even for high-income earners. Contributions may be made by the due date (including extensions) of the business’s income tax return for that year.
If you participated in a high-deductible health plan (HDHP), you can contribute $4,150 for individual or $8,300 for family coverage (an additional $1,000 for those 55 and older) for tax year 2024 to a health savings account (HSA). Many people use HSAs to cover immediate out-of‑pocket health care costs. But HSAs are also a good way to invest for the long term—tax‑free—to offset future qualified health expenses in retirement. Your contribution amount is generally fully tax-deductible and is recorded on IRS Form 8889 (Health Savings Accounts (HSAs)).
Certain households making contributions to an IRA or a workplace retirement plan may also benefit from a tax credit called the Saver’s Credit. If your adjusted gross income is $38,250 or less ($76,500 or less if married filing jointly), you could receive a tax credit up to $1,000 ($2,000 if married filing jointly). While $1,000 to $2,000 may not seem like a large sum, a tax credit reduces your tax liability dollar for dollar. This credit, however, will not result in a tax refund if your tax liability is less than zero. If you fall into these thresholds, you may want to spend a little extra time to complete IRS Form 8880 (Credit for Qualified Retirement Savings Contributions).
If you haven’t taken full advantage of your 2024 tax deductions, now’s the time to act. All it requires is a little tax planning. Determine what type of contributions you’re eligible for, along with what works best for your overall financial plan. Saving as much as you can now may provide a tax break today, but it could also grant you valuable time to allow your investments to grow for the future.
Judith Ward, CFP®
Thought Leadership Director
Judith Ward is a thought leadership director in the Individual Investors Group within Global Distribution. Judith provides guidance on personal finance and retirement-related topics for individuals. She also partners across the enterprise to develop retirement thought leadership and T. Rowe Price perspectives and is responsible for leveraging these insights in white papers, client communications, presentations, and bylined articles. Additionally, she serves as both a subject matter expert and spokesperson for the firm, speaking at client and community events and for media opportunities. Judith has been featured nationally in print, radio, and television. She is a vice president of T. Rowe Price Advisory Services, Inc.
1 For 2024, the total contributions you make each year to all of your Traditional IRAs and Roth IRAs can’t be more than $7,000 ($8,000 if you’re age 50 or older), or if less, your taxable compensation for the year.
Important Information
This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.
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