Are Your IRA Contributions Tax-Deductible?

The contribution deadline for 2024 contributions is April 15, 2025. Review the 2024 contribution and deduction limits here or visit the IRS website.

Account Options for Individuals Seeking Potential Tax Deductions

• Traditional IRA

Contributions to a Traditional IRA may be deductible up to the contribution limit, if you qualify per the eligibility requirements outlined above.

Contributions to a Traditional IRA are generally made with pre-tax dollars, investments within the IRA grow tax-deferred, and taxes are paid on the money/earnings when withdrawn.

Video: John Bowens explains why tax deductions aren’t the only tax benefits to consider when thinking about retirement accounts.

• Health Savings Account (HSA)

Compared to Traditional IRAs, Health Savings Accounts are an often overlooked source of potential tax deductions.

Contributions to an HSA are tax deductible, even if you don’t itemize your deductions, as long as the contributions were not made by an employer.

Potential tax deductions are just one of the “triple tax benefits,” so if you are looking for tax deductions for this past year and have a high deductible health plan, consider opening and contributing to an HSA.

Account Options for Business Owners Seeking Potential Tax Deductions

If you own a business, you may be eligible for retirement plans with potentially larger contribution and deduction limits, in addition to an IRA and/or HSA.

Schedule a consultation with an Equity Trust IRA Counselor to discuss account options for your business.

As with all our accounts, our small business plans have the freedom to invest beyond the stock market, including alternative assets such as real estate, notes/private debt, private equity, and more.

• Simplified Employee Pension (SEP)

If you are self-employed or own a business with up to 25 employees, you may be eligible to establish a SEP IRA.

Employer contributions to a SEP IRA are generally tax deductible, subject to certain requirements and annual limits.

According to the IRS, the most you can deduct on your business’s tax return for SEP IRA contributions is the lesser of 25 percent of employee compensation or the annual contribution limit.

If you are self-employed and contribute to your own SEP-IRA, there is a specific computation to determine the maximum deduction.[1]

• Savings Incentive Match Plan for Employees (SIMPLE)

The SIMPLE is an incentive-match plan designed for small businesses, generally with 100 or fewer employees, who have no other qualified plans.

Employers contribute a percent-based salary match (1-3 percent) and employees may elect to contribute through salary deferral.

As the employer, you may deduct contributions made to employees’ SIMPLE IRAs on your business tax return. However, employee participants cannot deduct contributions to their SIMPLE IRA.[2]

• Solo 401(k)

A Solo 401(k) combines elements of the SEP and SIMPLE accounts.

It provides business owners the opportunity to contribute as both the employer and employee with potentially higher contribution and deduction limits.

Designed for owner-only businesses, a Solo 401(k) can be established by both incorporated and unincorporated businesses, sole proprietors, partnerships, and corporations.

The only employees must be self-employed partners and their spouses. Contribution deadlines for a Solo 401(k) are the last day of the calendar year.

Therefore, unlike other accounts, the contribution deadline for those seeking potential tax deductions for the 2024 tax year passed on December 31, 2024.[3]

Self-Directing Your Tax-Deductible Accounts

With a self-directed IRA custodian such as Equity Trust, individuals and business owners have the opportunity to invest in alternatives outside of traditional assets like stocks, bonds, and mutual funds.

Whether you have experience in real estate, private equity, precious metals, or cryptocurrency, it’s possible to build wealth for retirement by investing in what you know best with your tax-advantaged account(s).

What are your plans for reducing your tax burden now and in the future?

Schedule a consultation with an Equity Trust Account Executive to discuss your tax-advantaged account options for you or your business.

[1] https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps#contributions
[2] https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-simple-ira-plans#contributions
[3] https://www.irs.gov/retirement-plans/one-participant-401k-plans