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There May Still Be Time to Lower Your 2023 Tax Bill

February 26, 2024

There May Still Be Time to Lower Your 2023 Tax Bill

If you’re preparing to file your 2023 tax return, you may still be able to lower your tax bill – or increase your refund. If you qualify, you can make a deductible contribution to a traditional IRA right up until the original filing deadline, April 15, 2024, and see tax savings on your 2023 return.

For eligible taxpayers, the 2023 contribution limit has increased to $6,500, or $7,500 for taxpayers aged 50 and up on Dec. 31, 2023. If you’re a small business owner, you can establish and contribute to a Simplified Employee Pension (SEP) plan up to the extended due date of your return. The maximum SEP contribution you can make for 2023 is $66,000.

What determines eligibility? To make a fully deductible contribution to a traditional IRA, you (and your spouse, if you’re married) must not be active participants in an employer-sponsored retirement plan or, if you are, your 2023 modified adjusted gross income (MAGI) must not exceed the applicable limits:

For single taxpayers covered by a workplace plan, $73,000 (partial deduction available up to $83,000 MAGI).
For a married couple filing jointly, where the spouse making IRA contributions is covered by a workplace plan, $116,000 (partial deduction available up to $136,000 MAGI).
If the spouse making the IRA contributions isn’t covered by a workplace plan but his or her spouse is, $218,000 (partial deduction available up to $228,000 MAGI).

For married couples filing separately, where at least one spouse is covered by a workplace plan, the ability to deduct IRA contributions is extremely limited.

Contact the office if you want more information about this important topic to help you save the maximum tax-advantaged amount for retirement.