If you’re a taxpayer, and lets face it, aren't we all? Every year we do the juggling act or the hope and pray dance that we don't owe Uncle Sam anything additional. You’ve likely noticed that everything feels more expensive this year. But while inflation is taking a bite out of your paycheck, a new IRS rule for 2026 might actually help you take a bite out of your tax bill.

The IRS recently announced that the annual contribution limit for Traditional IRAs has increased to for 2026 to $7,500 (and $8,600 for those age 50 and older). For Tax Year 2025 its still $7,000. This isn't just a "retirement goal", it is one of the last remaining "above-the-line" deductions that can directly lower your taxable income for the year.

The Math: How a $7,000 Contribution "Pays You Back"

When you contribute to a Traditional IRA, or a SEP, that money is deducted from your total income before you are taxed. Depending on your tax bracket, this could result in an immediate "discount" on what you owe in taxes.

Note: For a resident in the 24% bracket, putting $7,000 into a Betterment IRA effectively only "costs" you $5,320 out of pocket because you would have paid that other $1,680 to the IRS anyway.

Who Should I Use For My IRA?

You can use any brokerage account, but one of the new companies we like a lot is Betterment. While most banks make you fill out stacks of paperwork to open an IRA, Betterment was built to help you capture these tax breaks before the deadline passes. Here are a few things we like about Betterment IRA.

• Instant Digital Setup: You can open your account and initiate your tax-deductible contribution in minutes, not days.
• Automated Diversification: Once your money is in, Betterment’s technology immediately puts it to work in a globally diversified portfolio of low-cost ETFs.
• No "Analysis Paralysis": You don't have to spend hours researching stocks. Betterment builds the portfolio based on your age and when you want to retire.

The "April 15th" Urgency

You have until the tax filing deadline to make your contribution count for the previous year. For many, this is the difference between owing the IRS on tax day or receiving a refund check.

By taking advantage of the $7,000 limit, you aren't just saving for a 70-year-old version of yourself, you're giving your current self a significant financial break right now.

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