Retirement Plans Last Year’s Taxes under SECURE Act Rules
Most people think that once December 31 passes, the chance to set up a retirement plan for tax deductions is gone. But thanks to the SECURE Act, that’s no longer true.
Today, business owners and high-income earners can set up retirement plans after year-end—and still claim the tax deduction for the previous year. This rule creates a powerful tax-saving opportunity, especially for those who didn’t finalize a pension or cash balance plan before December 31.
In this article, we’ll explain how the SECURE Act extended deadlines, which retirement plans qualify, and how you can still use retirement plans last year’s taxes.
Today, business owners and high-income earners can set up retirement plans after year-end—and still claim the tax deduction for the previous year. This rule creates a powerful tax-saving opportunity, especially for those who didn’t finalize a pension or cash balance plan before December 31.
In this article, we’ll explain how the SECURE Act extended deadlines, which retirement plans qualify, and how you can still use retirement plans last year’s taxes.
What the SECURE Act Changed for Retirement Plans?
The SECURE Act (Setting Every Community Up for Retirement Enhancement) , first passed in 2019 and updated by SECURE Act 2.0 (2022) , included a provision allowing employers to adopt new retirement plans up to their tax filing deadline (including extensions).
Before the law:
- Employers had to set up retirement plans by December 31 of the tax year.
After the law:
- Employers now have until their tax filing deadline—as late as October 15 (with extensions) —to establish a retirement plan for the previous tax year.
This means in 2025, you can still set up a 2024 retirement plan and claim the deduction on your 2024 tax return.
Which Retirement Plans Qualify?
Qualifying Plans
Cash Balance Plans (Defined Benefit Plans) – Huge deduction potential ($100k–$300k+)
SEP IRAs – Flexible, easy setup for small businesses
Profit-Sharing Plans – Contributions up to 25% of compensation
401(k) Plans (Employer Side Only) – Employee deferrals must be made by 12/31, but employer contributions can qualify
Non-Qualifying Plans
Employee-only 401(k) deferrals (must be elected before 12/31)
Roth contributions (not deductible, regardless of timing)
This makes pension deductions through a cash balance plan particularly attractive, since you can implement them after year-end.
Example: Last-Minute Pension Deduction
Let’s say Emma, a 52-year-old business owner, earned $500,000 in 2024. She didn’t set up a plan by December but realized during tax season she needs deductions.
- In March 2025, she sets up a cash balance plan
- She contributes $150,000 for 2024
- Her taxable income drops to $350,000
At a 35% tax rate, that’s $52,500 in tax savings—even though the plan was created after year-end.
Calculate your Contributions Today!
Click here to Try our Pension Deduction CalculatorIRS Deadlines You Need to Know
- Regular Filing Deadline: April 15, 2025 (for 2024 returns)
- Extended Deadline: October 15, 2025 (with extension)
As long as you establish the plan before filing, the contributions can count toward last year’s taxes.
Benefits of Setting Up Plans After Year-End
- Flexibility – Decide after reviewing your profits whether a plan makes sense.
- Bigger Deductions – Cash balance plans allow six-figure contributions.
- Catch-Up Options – High-income earners over 50 benefit even more.
- Small Business Incentives – SECURE Act offers tax credits for new plans.
- Strategic Planning – Combine with a 401(k) for maximum savings.
Common Mistakes to Avoid
- Assuming only IRAs can be opened for prior-year contributions
- Missing the extended filing deadline
- Forgetting that employee deferrals must be made by December 31
- Not consulting an actuary for defined benefit/cash balance plans
- Contributing more than IRS rules allow
SECURE Act 2.0 Enhancements
The SECURE Act 2.0 expanded incentives even further:
- Bigger catch-up contributions for those age 60–63
- Tax credits covering 100% of plan startup costs for small businesses
- Automatic enrollment requirements starting in 2025 for new 401(k) and 403(b) plans
These provisions make 2025 one of the most advantageous years yet to explore retirement plans for last year’s taxes.
FAQ
1. Can I still open a retirement plan for 2024 in 2025?
Yes—under SECURE Act rules, you can establish certain plans by your tax filing deadline.
2. Which plans qualify for this rule?
SEP IRAs, profit-sharing, and employer-funded pensions like cash balance plans.
3. Do employee 401(k) contributions qualify retroactively?
No—deferrals must be made by December 31 of the tax year.
4. What’s the latest I can set up a plan?
October 15, 2025, if you file an extension.
5. How much can I deduct?
Depending on the plan, deductions range from a few thousand (SEP IRA) to over $300k (cash balance).
Conclusion: Don’t Miss This Window
The SECURE Act created a powerful opportunity: the ability to use retirement plans last year’s taxes. For high-income earners and business owners, this means six-figure deductions and dramatic retirement tax savings—even if you missed the December 31 deadline.
Contact Us (Pension Deductions) today to see how much you could save by setting up a retirement plan before filing your return.
Contact Us (Pension Deductions) today to see how much you could save by setting up a retirement plan before filing your return.
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