How to Maximize Deductions for Retirement Contributions

Introduction

Contributing to a retirement account not only secures your future but also provides tax deductions
that lower your Adjusted Gross Income (AGI). Under IRC § 219, contributions to Traditional IRAs,
401(k)s, and other retirement plans are tax-deductible, helping you reduce taxable income.

This guide explains how to maximize retirement deductions in 2025, including contribution limits,
tax benefits, and IRS rules.

Which Retirement Contributions Are Tax-Deductible?

1. Traditional IRA Contributions (IRC § 219)

•  2025 Contribution Limit: $7,000 ($8,000 if 50+)
•  Deductible for both employees and self-employed individuals
•  Phase-out limits apply if covered by an employer plan

2. 401(k) & 403(b) Contributions (IRC § 402(g))

•  2025 Contribution Limit: $23,000 ($30,500 if 50+)
•  Reduces taxable wages for W-2 employees
•  Employer contributions do not count toward the limit

3. SEP IRA for Self-Employed (IRC § 408(k))

• Contribution Limit: 25% of net earnings, up to $69,000
•  Fully deductible for business owners and freelancers

4. SIMPLE IRA Contributions (IRC § 408(p))

• 2025 Contribution Limit: $16,000 ($19,500 if 50+)
•  Employers may match up to 3% of salary

5. Solo 401(k) for Self-Employed (IRC § 401(k))

•  Employee Contribution: $23,000 ($30,500 if 50+)
•  Employer Contribution: 25% of net earnings, up to $69,000 total

Tax Forms: Form 5498 (IRA), Form 1040, Schedule 1

How to Maximize Retirement Contribution Deductions

Step 1: Contribute the Maximum Allowed

•  Increase contributions to Traditional IRA and 401(k) to reduce AGI.

Step 2: Use Catch-Up Contributions (If 50+)

Contribute extra $7,500 to a 401(k) or $1,000 to an IRA.

Step 3: Deduct Contributions on Form 1040

•  IRA Deductions: Report on Schedule 1, Line 20.
•  Self-Employed Plans: Report on Schedule C (Form 1040).

Step 4: Open a Retirement Plan If Self-Employed

•  Choose between a SEP IRA, Solo 401(k), or SIMPLE IRA for tax benefits.

Step 5: Contribute Before the Tax Deadline

•  You can contribute to an IRA until April 15, 2026, for the 2025 tax year.

IRS Forms & Compliance Checklist

•  Form 1040 – Main tax return
•  Schedule 1 (Form 1040) – Report IRA deductions
•  Form 5498 – IRA contributions
•  Schedule C (Form 1040) – Self-employed retirement deductions

Conclusion

Maximizing retirement contributions helps lower taxable income and grow tax-advantaged
savings. Whether through an IRA, 401(k), or self-employed retirement plan, making full
contributions can provide significant tax savings.

For expert retirement tax planning, schedule a consultation with Anshul Goyal, CPA EA FCA, a
licensed tax professional and IRS representative.

Frequently Asked Questions (FAQs)

1. Can I deduct Roth IRA contributions?
No, Roth IRA contributions are not tax-deductible.

2. Are 401(k) contributions tax-deductible?
Yes, Traditional 401(k) contributions reduce taxable wages.

3. Can I deduct SEP IRA contributions?
Yes, SEP IRA contributions are deductible for self-employed individuals.

4. What is the deadline for IRA contributions?
You have until April 15, 2026, to contribute for 2025 taxes.

5. Do employer 401(k) matches count toward my limit?
No, employer contributions do not reduce your personal limit.

About Our CPA

Anshul Goyal, CPA EA FCA is a licensed Certified Public Accountant and an IRS Enrolled Agent (EA).
He specializes in retirement tax strategies, IRS compliance, and wealth planning.

Schedule a consultation today with Anshul Goyal, CPA, to maximize your retirement deductions!