As tax season moves closer, it’s the perfect moment to revisit your financial plans—especially any contributions you intend to make to your IRAs or HSAs. These accounts offer valuable tax advantages, but to apply them to the 2025 tax year, your contributions must be completed before the federal filing deadline.
Below is a clear overview to help you take full advantage of these opportunities before April 15.
Why IRA Contributions Matter Right Now
If you’re aiming to strengthen your retirement savings and possibly lower what you owe in taxes, making an IRA contribution before the deadline is a smart step. The IRS sets annual contribution limits, and staying within those guidelines can help you make the most of your tax benefits.
For 2025, individuals younger than 50 can contribute up to $7,000 to an IRA. If you're age 50 or older, that limit increases to $8,000 to help those nearing retirement add more to their nest egg.
These caps apply to the total amount you contribute across all IRAs—Traditional, Roth, or a mix of both. Additionally, you cannot contribute more than the income you earned for the year. If you personally didn’t earn income but your spouse did, a spousal IRA may allow you to contribute based on their earnings.
How Income Impacts Traditional IRA Deductions
Anyone with earned income is allowed to put money into a Traditional IRA. However, whether your contributions are tax-deductible depends on your income level and whether either you or your spouse participates in an employer-sponsored retirement plan.
For example, if you are single and covered by a workplace plan, you may deduct your full contribution if your income is $79,000 or below. Those earning between $79,001 and $88,999 can deduct part of their contribution. Once your income reaches $89,000, the deduction is no longer available.
For married couples in which both spouses have access to retirement plans at work, full deductions are allowed when combined income is $126,000 or less. A partial deduction applies for incomes between $126,001 and $145,999. At $146,000 or higher, deductions aren’t available.
Even if you aren’t eligible for a deduction, a Traditional IRA still allows your savings to grow tax-deferred until you take distributions in retirement.
Roth IRA Rules Work Differently
With Roth IRAs, your ability to contribute is tied directly to your income. Those within lower income ranges can contribute the full allowable amount. If your income falls into a mid-range bracket, your contribution limit may be reduced. At higher income levels, contributing to a Roth IRA isn’t permitted.
Since these limits can shift slightly from year to year, it’s wise to verify your eligibility before making a deposit.
HSAs: A Tax-Smart Way to Prepare for Medical Costs
If you’re enrolled in a high-deductible health plan (HDHP), you may qualify for a Health Savings Account, commonly known as an HSA. This account is designed to help you save for medical expenses and offers significant tax benefits.
You can continue contributing to your 2025 HSA until April 15, 2026. For individuals with self-only HDHP coverage, the contribution limit is $4,300. Those with family coverage can contribute up to $8,550. If you’re 55 or older, you can add an extra $1,000 as a catch-up contribution.
What makes HSAs especially powerful is their triple tax advantage:
- Your contributions may reduce your taxable income.
- Earnings in the account grow without being taxed.
- Withdrawals used for qualified medical expenses are tax-free.
If your employer contributes to your HSA, their contribution counts toward your annual limit. Additionally, if you were only eligible for HSA participation for part of the year, your allowable contribution may need to be prorated—unless you qualify under the “last-month rule,” which allows full contributions based on December eligibility. Keep in mind that losing HSA eligibility the following year may result in taxes and penalties.
Avoid Exceeding Contribution Limits
Surpassing the annual contribution limits for an IRA or HSA can lead to tax complications. If excess contributions remain in your account, the IRS may impose a 6% penalty for each year the extra amount stays in place.
To avoid unnecessary penalties, make sure you understand the rules and verify how much you’ve contributed so far—including employer HSA contributions. If you discover that you over-contributed, removing the excess before the tax deadline can help you avoid the penalty.
Act Now to Strengthen Your Savings Strategy
Both IRAs and HSAs offer meaningful tax advantages that can support your long-term financial health—whether you’re saving for retirement or preparing for future medical expenses. But to take advantage of these benefits for the 2025 tax year, contributions must be made by April 15, 2026.
If you're unsure how much you can or should contribute—or which account type fits your situation best—consider reaching out to a financial professional. They can help you navigate these rules, avoid common errors, and make choices that align with your goals.
There’s still time to make a meaningful impact on your tax savings and financial future. Be proactive, review your options, and take action before the deadline arrives. If you have questions, please schedule some time with Alex & Ashley to discuss your situation.