• You can still contribute to your individual retirement account for 2021 through the tax-filing deadline.
• However, the write-off depends on your participation in workplace retirement plans and income.

If you didn't max out your individual retirement account for 2021, here's some good news: you still have time.

But if you're eyeing a deduction to lower your tax bill, you need to know the rules, experts say. 

The last chance for 2021 IRA contributions is the tax-filing deadline, which is April 18, 2022, for most Americans.

You can deposit up to $6,000 for 2021 or $7,000 if you're 50 or older, provided you've made at least that much from a job or self-employment.

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"Anyone can contribute to a traditional IRA — you, me, Jeff Bezos," said certified financial planner Howard Pressman, partner at Egan, Berger & Weiner in Vienna, Virginia. 

However, the ability to write off IRA contributions depends on two factors: participation in workplace retirement plans and income.

An investor and their spouse may be "in the clear" to write off their entire IRA contributions if both spouses aren't participating in an employer's retirement plan, said Larry Harris, CFP and director of tax services at Parsec Financial in Asheville, North Carolina. 

However, the rules change if either partner has coverage and participates in the plan, including deposits from the employee or company.

For example, participation may include employee contributions, company matches, profit sharing or other employer deposits.

IRA deduction rules

For 2021, single investors using a workplace retirement plan may claim a tax break for their entire IRA contribution if their modified adjusted gross income is $66,000 or less.

While there's still a partial deduction before they reach $76,000, the benefit disappears once they meet that threshold.

Married couples filing together may receive the full benefit with $105,000 or less, and their partial tax break is still available before reaching $125,000.

There's an IRS chart covering each of these limits here.

Spouses who don't work outside of the home may also contribute based on the income of the earning spouse, in what's known as a spousal IRA, Pressman added. 

"This also has income limitations, but they are higher than those for workers covered by a plan," he said. 

Non-deductible IRA strategies

Although some investors won't qualify for IRA contribution deductions, there are other options to consider.

Non-deductible IRA contributions are a popular choice because some investors may qualify to convert the after-tax deposit to a Roth IRA, known as a "backdoor" maneuver, bypassing the income limits. 

While the strategy was on the chopping block last fall, it survived negotiations in the House Democrats' social and climate spending plan. However, Build Back Better stalled in the Senate and talks are ongoing.

Other options may include maxing out a workplace retirement plan, including catch-up contributions for those who are age 50 and older, Pressman suggests.

After that, someone may consider investing in low turnover index mutual funds in a regular brokerage account.

"This account will not be subject to retirement rules, limiting your access to the funds, and when you take distributions your growth will be taxed at more favorable capital gains tax rates rather than higher ordinary income rates of IRAs," he added.

"While you will need to pay taxes on capital gains and dividends each year, using index funds with low turnover should keep these taxes to a minimum," he said.