QUESTION:
I’m getting ready to prepare and file my 2024 tax return and heard I could open a traditional IRA this year and deduct contributions from last year’s income on my tax return. Is that true?
ANSWER:
Anyone with earned income can open a traditional IRA before the tax filing deadline and contribute up to $7,000 of earnings ($8,000 if over age 50) for 2024 (and 2025), but they must qualify by income to get a tax deduction. (You can’t deduct contributions to a Roth.)
The deductibility phases out at different income levels depending on your filing status and whether you or your spouse has a qualified retirement plan at work. This means if your Modified Adjusted Gross Income (MAGI) is below the stated range, you can contribute the full amount to an IRA. But if your MAGI falls within this range, your contribution limit is reduced progressively until you cannot contribute at all if your MAGI exceeds the range.