The tax calendar often feels like a one-way street. However, for a few months each year, the IRS leaves a door open to the past.
There’s a little-known time window, from Jan. 1 until April 15, during which it’s not too late to influence your 2025 tax return. This isn’t a loophole; it is a standard provision allowing you to make prior-year contributions to an individual retirement account (IRA).
By making an IRA deposit now and earmarking it for 2025, you could lower your taxable income for a year that has already ended. It is one of the few ways to change your tax bill after the start of the new year.
How IRA contributions work
For the 2025 tax year, the deadline to contribute to both traditional and Roth IRAs is April 15, 2026.
This deadline is particularly powerful for those who realize they owe money when drafting their tax returns. A last-minute deposit into a traditional IRA can function like a time machine, pulling a deduction from the previous year to shrink what you owe today.
Before moving any money, you need to know exactly how much the IRS allows you to set aside. For the 2025 tax year, the base contribution limit for IRAs is $7,000.
If you are 50 or older, the IRS allows a catch-up contribution of an additional $1,000, bringing your total potential 2025 deposit to $8,000.
Remember that these limits apply to the total across all accounts. You cannot put $7,000 into a traditional IRA and another $7,000 into a Roth; the $7,000 (or $8,000) cap is the cumulative ceiling.
The immediate tax benefit of traditional IRAs
The primary reason to use this strategy is the immediate tax deduction. When you contribute to a traditional IRA, those funds are typically deductible from your gross income. If you contribute several thousand dollars, you could effectively reduce your tax bill by hundreds of dollars.
However, your ability to take the full deduction depends on whether you or your spouse is covered by a retirement plan at work. If you have a 401(k), the deduction begins to phase out for single filers earning more than $79,000.
While contributing to a Roth IRA won’t lower your tax bill, it’s still a savvy move. Unlike with a traditional IRA, your money will grow tax-free, and you won’t owe a cent in taxes on qualified withdrawals during retirement.
How to execute the prior-year contribution
When you log in to your brokerage or bank to make the transfer, you will see a prompt asking which year the contribution is for. You must explicitly select 2025. If you don’t specify, many institutions default to the current calendar year, which would count toward your 2026 limits instead.
Once the contribution is made, ensure you report it on your tax return. If you use a traditional IRA to lower your taxes, that deduction must be reflected on Form 1040, Schedule 1. If you’ve already filed your taxes but want to make a last-minute contribution, you can still do so and file an amended return to claim the deduction.
Tax season is usually associated with giving money away, but the prior-year IRA strategy is an opportunity to save on your taxes while saving for retirement. Whether you choose the immediate gratification of a traditional IRA deduction or the long-term tax-free power of a Roth, the key is to act before the April 15 clock runs out.
