With the holidays in the rearview mirror, another, less festive season looms: tax season. If you’re already worried about your next bill or hoping to maximize your tax refundthere are still steps you can take.
Here are three ways to further reduce your tax bill in 2024.
1. Contribute to a traditional IRA
You have until April 15 to fund an individual retirement account for the previous tax year, whether it’s a traditional IRA or a Roth IRA. In other words, your deadline for maximizing your 2024 IRA contribution is April 15, 2025.
But because a traditional IRA is funded with pre-tax dollars while a Roth IRA is funded with after-tax dollars, you’ll need to choose a traditional IRA if you want to reduce your taxable income for the year.
You may be able to deduct your entire traditional IRA contribution, depending on your income and whether you or your spouse has access to a workplace retirement plan. The table below presents the deductibility rules for 2024 and 2025.
Traditional IRA deduction rules for 2024 and 2025
| Tax filing status | 2024 | 2025 |
|---|---|---|
| Any tax filing status if neither you nor your spouse is covered by an occupational plan | The contribution is fully deductible | The contribution is fully deductible |
| Single (covered by an employment plan) | The contribution is fully deductible if income is $77,000 or less; a phase-out applies if income is between $77,000 and $87,000; not deductible if income is greater than $87,000 | The contribution is fully deductible if income is $79,000 or less; a phase-out applies if income is between $79,000 and $89,000; not deductible if income is greater than $89,000 |
| Married filing jointly (if you are covered by an employment plan) | The contribution is fully deductible if combined income is $123,000 or less; a phase-out applies if income is between $123,000 and $143,000; not deductible if income is greater than $143,000 | The contribution is fully deductible if combined income is $126,000 or less; a phase-out applies if income is between $126,000 and $146,000; not deductible if income is greater than $146,000 |
| Married filing jointly (if you are not covered by a professional plan but your spouse is) | The contribution is fully deductible if combined income is $230,000 or less; a phase-out applies if income is between $230,000 and $240,000; not deductible if income is greater than $240,000 | The contribution is fully deductible if combined income is $236,000 or less; a phase-out applies if income is between $236,000 and $246,000; not deductible if income is greater than $246,000 |
| Married filing separately (if either spouse benefits from a workplace scheme) | The contribution is partially deductible if your income is less than $10,000; no deduction if income is over $10,000 | The contribution is partially deductible if your income is less than $10,000; no deduction if income is over $10,000 |
If you are under age 50, you can contribute up to $7,000 to a traditional IRA, a Roth IRA, or a combination of the two in 2024 and 2025. You can make an additional $1,000 catch-up contribution to the during both tax years if you are 50 or older, which brings your maximum contribution to $8,000.
2. Fund your HSA
A health savings account lets you save and invest money before taxes. If you use your HSA funds for qualified IRS-approved medical expenses, your withdrawals are also tax and penalty free. Like IRAs, HSAs allow you to contribute until tax day for a given year, so you can fund your 2024 HSA until April 15, 2025.
Unused HSA funds carry over from year to year, even if you change jobs or health insurance. You can even use your HSA money for non-medical expenses without penalty once you turn 65, although withdrawals are considered taxable income if the money isn’t used for healthcare costs.
HSA limits for 2024 and 2025
| Type of coverage | limit 2024 | limit 2025 |
|---|---|---|
| Standalone only | $4,150 | $4,300 |
| Family | $8,300 | $8,550 |
If you are 55 or older, you can make an additional catch-up contribution of $1,000 in 2024 and 2025.
Note that to fund a health savings account, you will need to have what is called a high-deductible health plan. This means you’ll typically pay more out of pocket for many health services before your insurance kicks in.
3. Use a SEP IRA or Solo 401(k) for self-employment income
If you have self-employment income, you can use a SEP IRA or solo 401(k) to save for retirement. However, you don’t have to be a full-time business owner to take advantage of it. You can save in these accounts if you earn money freelancing or do gig work, like driving for Uber or delivering groceries on Instacart, on the side.
SEP IRA Rules
You can contribute up to $69,000 to a SEP IRA in 2024 and up to $70,000 in 2025, or up to 25% of your self-employment income, whichever is less. You can fund a SEP IRA even if you are covered by a workplace retirement plan for regular employment. However, if you own a business with employees, you will need to contribute the same percentage for each eligible employee.
You have until the date you file your taxes for your business to open and fund a SEP IRA. This means you can generally contribute to a SEP IRA for 2024 until April 15, 2025 – or until October 15 if you request a tax extension.
Solo 401(k) Rules
A solo 401(k) is sometimes called a single-person 401(k), and it’s essentially a 401(k) that you created yourself.
You can contribute up to the standard 401(k) limits of $23,000 in 2024 and $23,500 in 2025 as an employer, plus an additional 25% of your compensation as a business owner – but total contributions cannot exceed $69,000 in 2024 or $70,000 in 2024. 2025. If you are 50 or older, you can earn up to $7,500 in catch-up contributions for both tax years.
The deadline to contribute as an employee has already passed, but you can still contribute until the tax deadline as an employer. This means that you have until April 15, 2025 to make employer contributions, or until October 15, 2025 if you request an extension.
