Grow Financial Federal Credit Union
"Tax Advantages of an IRA" text with a graphic of an adding machine and dollar bill
February 11, 2021

There’s Still Time to Reduce Your Taxable Income for the 2020 Tax Year

You might think the last chance to impact your taxable income for the 2020 tax year ended December 31, 2020. For most deductions you’d be right. But there’s still another step you may be able to take to reduce your taxable income, and you have until April 15, 2021, to do it.

Contribute to a Traditional IRA.

Individual Retirement Accounts (IRAs) are designed to encourage saving by offering tax advantages.* New to IRAs? Learn the basics.

If you make a contribution to your Traditional IRA before the tax filing deadline, you may be able to deduct your contributions on your tax return for the 2020 tax year, which can lower your taxable income. IRAs also have annual contribution limits. You can get the current limits from the IRS. There are rules about which tax filers are eligible for this deduction and for what amount, based on whether or not you are covered by a retirement plan at work. For anyone not covered by another plan at work, here’s what you can deduct:

As you can see, anyone not covered by a retirement plan at work can deduct the full contribution amount, with no income limit. That’s right. Lower your tax bill simply by saving toward retirement.

For anyone who is covered by another retirement plan at work, or whose spouse is covered by another retirement plan at work, you may still be able to deduct some or all of your contribution to an IRA, depending on your income. Find the IRS deduction limits for those covered by a work retirement plan here.

Questions? Call our IRA specialists at 800.839.6328, ext. 2693.

*Certain restrictions apply. Not all taxpayers are eligible. Consult your tax advisor.

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