Did you know that you can use your tax refund to directly fund an IRA, including up to last year’s contribution limits? Well, you can. Now, if you’ve watched my other videos, you know I don’t love getting a refund when I file taxes because that just means you’ve given the government an interest-free loan all year. But if you are getting a refund, here’s how you can put it to good use instead of just letting it disappear into your spending account.

Hi, I’m Hunter Brockway at Boca Retirement Strategies, here to help set you up for a successful, stress-free retirement while spending more and avoiding being killed in taxes.

Here’s what you need to know about using a tax refund to fund an IRA. You can directly deposit your tax refund into an IRA up to the annual contribution limit. In 2024 and in 2025, the IRA contribution limit is $7,000 or $8,000 if you’re age 50 and over. You have until the tax filing deadline, typically mid-April of the following year, to contribute to the prior year. You can split your tax refund among multiple accounts, so if you’re married, you can also fund a spousal IRA for a non-working spouse.

Here’s how to use your tax refund to fund an IRA:

Step one: Prepare your tax return early. Before you file, determine your refund amount and decide how much, if any, you want to contribute to an IRA or Roth IRA. Remember, you can only contribute up to the maximum allowed limit.

Step two: Direct your refund correctly. For one account, use IRS Form 1040 and have your refund deposited directly. For multiple accounts, use IRS Form 8888 to split up your refund in up to three different accounts.

Step three: Avoid these common mistakes. Double-check your Form 8888. The IRS provides five key cautions in the instructions. If you mess this up, your contribution may not count properly. Also, confirm IRA coding. If you’re making a prior year contribution, make sure your financial institution correctly codes it as such. Don’t assume they’ll do it automatically.

Additionally, don’t wait until the last minute. If you file in April, your refund might not hit your account before the IRA contribution deadline for the prior year, causing you to miss out on funding your IRA for that prior year. If your refund is adjusted—due to tax errors or offsets like passive taxes—the amount going into your IRA may change. If this happens, review your contributions and file an amendment if necessary.

Take action now. Prepare your tax return early so you have time to contribute to eligible retirement accounts. Max out your retirement savings by using your refund wisely instead of letting it go to waste. Get professional guidance to ensure you’re taking advantage of tax savings opportunities.

I’m Hunter Brockway at Boca Retirement Strategies. Please subscribe to our YouTube channel so more people can find our helpful videos.