As the April 15 Deadline Approaches, the IRA Is One of the Most Overlooked Tax Breaks in Retirement Planning

With just days remaining before the April 15 deadline, many people are still racing to file their 2025 tax returns. The U.S. tax code is incredibly complex, so no one should expect to know all of the different rules and tax breaks.

However, if you think you're going to owe a lot in taxes this year, there are still ways to get your IRS bill down. One often overlooked tax break that's within the taxpayer's control is contributing to an individual retirement account (IRA), the investment vehicles used by tens of millions of Americans to save for retirement in a tax-efficient manner. Here's why.

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Lower your tax bill while saving for retirement

IRAs are retirement accounts for those without access to employer-sponsored 401(k) plans. In an IRA, individuals make contributions and manage their own investments.

IRA contributions, which must be made with earned income, are made pretax, meaning they are deducted from taxable income, resulting in a lower tax bill. Contributions then grow tax-deferred, and retirees treat withdrawals as ordinary income.

Individuals should understand that once they contribute to an IRA, that money can't be withdrawn until they are 59 1/2. Pull the money out early, and there is a 10% penalty -- unless it is for a qualifying reason, such as purchasing a first home.

Because of tax advantages, IRA contributions are capped each year. In 2025, the contribution limit was $7,000, so if you only contributed a portion of that in 2025, you can contribute the rest until April 15 and count it toward your 2025 limit.

Contribution limits increase each year. In 2026, the new limit will be $7,500. There is also a catch-up contribution for people over 50, which was $1,000 in 2025 and $1,100 this year.

Not everyone will be able to make the full contribution. At the end of the day, you need to cover your daily and annual expenses. However, if you do have the money, this is one of the best tax breaks you can give yourself, because you are also being smart by saving for retirement. And by contributing to your 2025 total, you leave your $7,500 contributions untouched for this year.

Retirement planning can be daunting, but the best way to do it is to chip away at savings slowly over time. The earlier you start making contributions to an IRA or 401(k), the better off you will be in the long term.

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