The deadline for filing taxes is Tuesday, April 15, 2025. It’s almost here, so take advantage of these last-minute tips.
1. Reduce your taxable income for 2024 with an HSA contribution.
You only have until April 15, 2025, to contribute to your HSA for the 2024 tax year, so don’t miss out.
Contributions to an HSA are tax-deductible, and the earnings (if invested) are tax-free, as are withdrawals for eligible medical expenses.
For 2024, you can contribute up to $4,150 (depending on your coverage amount) for individual coverage and $8,300 for family coverage to your HSA, plus $1,000 for a 55+ catch-up contribution. You report your contributions on Form 8889 with the total contributions transferred to and reported on your Form 1040.
2. Make sure you’ve maxed out your IRA contribution limit for the year.
If you haven’t met your contribution limit by the April deadline for 2024, you can designate IRA contributions made between January 1 and April 15, 2025, for either 2024 or 2025.
Traditional IRA contributions made in this 3 ½ month time frame may be eligible to be deducted from your 2024 taxes. It is dependent on your income level and your work retirement plans.
Roth IRA: Though not tax deductible in 2024, designating them as a 2024 contribution allows you to make additional contributions in 2025 if you are still eligible. Contributions are subject to income limits.
IRA Contribution from a Spouse: If a spouse is still working, they can contribute to their spouse’s IRA after retirement. The contribution limits for both spouses cannot exceed $15,000 (for 2024) when one is 50 or $16,000 when both are over 50.
Total contribution limits for traditional and Roth IRAs for 2024 are $7,000 or $8,000 for those 50 or older.
3. Avoid the 401k and Pension Payout Trap
To prevent tax withholding on lump-sum payments or rollover distributions from a company plan, ask that the amount be sent directly to a rollover IRA.
4. Know your retirement plan contribution limits and catch-up contributions.
401(k), 403(b), and 457 plans: Contributions for these plans are capped at $23,000 for 2024. Taxpayers 50 and older can once again put in $7,500 more as a “catch-up” contribution.
Simple IRAs: The 2024 cap on contributions to SIMPLE IRAs is $16,000, plus an extra $3,500 for people age 50 and up.
Traditional and Roth IRAs: Limits for IRAS are $7,000, plus $1,000 as an additional catch-up contribution for those aged 50 and up.
5. Understand required minimum distributions (RMDs) for 2024 and avoid penalties.
Recent changes have made it quite confusing, and I’m here to help clients navigate them. In the meantime, here’s more on RMDs from the IRS.
Your birth year determines when you must start taking required minimum distributions.
- For people born in 1951 or earlier, taking the required minimum distributions is necessary this year (2024).
- However, if you were born on or after January 1, 1952, you’re not required to take RMDs in 2024.
If you missed your yearly RMD or didn’t withdraw enough, there’s a 25% penalty. However, reducing the penalty to 10% is possible if you correct the RMD within two years.
6. Consider filing for an extension.
With little time left, you might want to file an extension for an October 15, 2025 deadline. You’ll still be required to pay your tax obligation by April 15, but you will avoid having to file an amended return with the IRS.
7. Check your withholding status.
The earlier, the better when it comes to checking your withholding status. Update it if your employer is withholding too much or too little.
8. Start thinking about next year.
It’s never too soon to consider tax strategies that could benefit you next year and long term.
GRIP Financial focuses on tax-efficient retirement planning, connecting the pieces of your retirement puzzle to maximize your after-tax income and investments.
Schedule a call with a GRIP Financial advisor to discuss retirement tax strategies that could work for you and feel confident about your retirement.
