With Tax Day quickly approaching (April 15, 2026), you may hear a lot of talk about Individual Retirement Accounts (also known as IRAs). An IRA is a type of investment account that allows you to save money for retirement on a tax-advantaged basis, but what does that have to do with tax season? Depending on the type of IRA you choose, you may be able to take a dollar-for-dollar reduction in your income when you contribute to an IRA.
For example, if you contribute $7,000 (the annual limit for those under age 50) to a traditional IRA for the 2025 tax year, you may be able to reduce your taxable income by that amount, depending on your eligibility. This can be particularly helpful if you’re in a higher tax bracket and want to lower your tax bill while saving for the future.
If you’re age 50 or older, you may also be eligible to make catch-up contributions to your IRA. For the 2025 tax year, taxpayers 50 and older can contribute an additional $1,000, for a total of $8,000. Catch-up contributions can be a useful option for people who are getting a later start or trying to make up for gaps in their retirement savings.
Beyond potential tax deductions, IRAs also offer tax-deferred growth. This means investment earnings within a traditional IRA aren’t taxed until you withdraw them in retirement. Over time, this tax treatment can help savings grow more efficiently than investments held in a taxable account.
By contributing to an IRA before tax season, you can help ensure that you’re on track to meet your retirement savings goals. The earlier you start, the more time your investments will have to grow. By contributing to an IRA regularly, you can help ensure that you’re saving enough to live comfortably in retirement.
If you’re thinking of opening an IRA ahead of the filing deadline, there are a few things to keep in mind:
- Contribution limits apply across all IRAs. For the 2025 tax year, the total you can contribute to all your IRAs combined is $7,000 (or $8,000 if you’re age 50 or older).
- Roth IRA eligibility depends on income. How much you can contribute to a Roth IRA is based on your income and filing status. For the 2025 tax year, Roth IRA contributions begin to phase out at higher income levels and may be limited or unavailable for some taxpayers.
- Traditional IRA deductions depend on workplace coverage. If you’re not covered by a retirement plan at work, you may be able to deduct your full contribution. If you are covered by an employer plan—or if your spouse is—deductibility may be limited based on income.
- Lower- and moderate-income earners may qualify for the Saver’s Credit. The Retirement Savings Contributions Credit (a.k.a., the saver’s credit) can reduce your tax bill by 10%, 20%, or even 50% of qualifying retirement contributions, up to a maximum contribution of $2,000 per person. Eligibility and credit amounts depend on adjusted gross income.
- Rollovers require care. If you change jobs or retire, you may be able to roll money from an old 401(k) into an IRA. A direct rollover—where funds move directly between accounts—can help avoid taxes and penalties that may apply if the money is paid to you first.
Before opening an account, making contributions, or moving retirement funds, it’s a good idea to talk with a qualified tax professional who can help you understand how IRA rules apply to your specific situation.
It’s also worth noting that you generally have until April 15, 2026, to make IRA contributions that count toward the 2025 tax year. While the window is limited, there may still be time to contribute and potentially reduce your tax bill for the prior year.