5 ways to max out your tax-deductible contributions

Our Wealth Planning expert Jill Garvey offers helpful pointers to take your contributions to the max before the tax filing deadline. It starts with a solid understanding of your taxable income. Then, review all your options for adding deductions in the ways that will most benefit future you. Because a little know-how now can have a big payoff down the line.

1. Know your adjusted gross income

When you’re mapping out your tax strategy, this is a crucial first step, according to Garvey. “To know which types of additional tax-deductible contributions are best for your financial goals and tax situation, you first need to know your adjusted gross income,” explains Garvey.

To calculate your adjusted gross income, start by understanding your income from all sources during the calendar year, including salary, wages, business income, any interest earned, dividends paid, capital gains realized, Social Security benefits, and distributions from IRAs and retirement plans. Then subtract any tax-deductible amounts, which can include alimony payments, educator expenses, certain business expenses, HSA contributions and retirement contributions. The total amount determines your taxable income. Once you have that amount, you can determine your tax rate, depending on how you file.

Not listed in the chart is the lowest rate of 10%, for individual taxable income under $11,925 or married filing jointly taxable income under $23,850.

2. Contribute the max to tax-deductible retirement and medical accounts

If you can and are interested in further lowering your adjusted gross income, you can max out contributions to your employee retirement account. While you likely are contributing the full match amount, the total could still be less than the annual limit. By contributing the max allowed by the IRS, you’ll increase your retirement potential while lowering your adjusted gross income, which could mean lowering your taxes.

Additionally, you can max out your contribution to your HSA account, which is triple-tax-advantaged. Contributions are pre-tax, the account grows tax-free and you can also withdraw it tax-free for qualified medical expenses.

3. Diversify by contributing to a Roth

“By putting a portion of your retirement contributions into a Roth, you’re diversifying the tax status of your retirement plans,” explains Garvey. The first step is to check if your employer offers a Roth option. If yes, then you can make contributions up to the allowable limit into the Roth portion of the plan.

If your employer doesn’t offer a Roth, you can do what’s called a Backdoor Roth contribution. To do this, you need to open two personal brokerage accounts: a Traditional IRA and a Roth IRA. Then you contribute up to the IRA limit into the Traditional IRA. Next, immediately convert that contribution to your Roth IRA. If you go this route, make sure to file Form 8606 for tax purposes. If your income is within certain limits, you can also contribute to a Roth IRA.

While this money is after-tax and you won’t receive a current year income tax deduction, you can withdraw the funds tax-free in retirement, versus a standard 401k, which will be taxed when you take out distributions.

4. Make a prior-year contribution

Is there an account where you didn’t contribute the full allowable amount? You can make up the difference with a contribution made before this year’s tax filing deadline to count for the previous year with IRAs, SEP IRAs and Simple IRAs. Simply go into your account, make a deposit and select the tax year (i.e. Apply to 2025), which is generally in a dropdown menu or designated by checking a box on the page. Before you contribute, you’ll want to decide exactly how much you can contribute based on the yearly limits and what you have contributed so far.

“This is a great option for business owners especially,” says Garvey. “Those who may not have access to a retirement plan through work can really benefit. That would also include non-working spouses.” An additional contribution maximizes investment power for retirement and reduces taxable income, potentially bringing you into a lower tax rate. Just be mindful of income limitations.

5. Donate appreciated securities

According to Garvey, when it comes to charitable donations the real question to ask is whether to give cash or appreciated securities, which are investments that have gone up in value. “You can give a gift that also helps you to diversify and rebalance your portfolio while obtaining an income tax deduction,” says Garvey. “The markets are at all-time highs. You have certain sectors and stocks that have substantially risen in value. Therefore, I think it would be a very good idea to utilize appreciated securities for a charitable donation,” she continues.

You pay capital gains tax when you sell appreciated securities, but not if you donate appreciated securities to a charitable organization. This could mean a lower adjusted gross income for you and a tax-free gift for the charity.

Now you know some key strategies for simultaneously lowering your tax rate and setting yourself up with more money for retirement. Do what you can before the filing deadline this year and be better prepared with a smart approach for next year, too.