Each year, the IRS makes adjustments that impact retirement savings, tax contributions, and various other financial thresholds. Staying updated on these changes can help you get a head start on planning and make the most of your benefits. Let’s dive into the major updates for 2025 and see how they might impact your financial strategy.
401(k) and 403(b) Contribution Limits Increase
For 2025, employees can now contribute up to $23,500 to a 401(k) or 403(b) plan if they’re under 50, up from $23,000 in 2024. While the catch-up contribution limit for those over 50 stays at $7,500, employees aged 60–63 can contribute an additional catch-up amount of up to $11,250.
Combined Employee and Employer 401(k) Limits
Total combined contributions for 401(k) and 403(b) plans are also increasing. For those under 50, the new cap is $70,000, while those over 50 can contribute up to $77,500. If you’re in the 60–63 age bracket, you can max out at $81,250, including the additional catch-up contributions.
SEP IRA Limits
For SEP IRAs, the contribution limit increases from $69,000 to $70,000 in 2025.
Traditional and Roth IRA Limits
No changes here—IRA contribution limits remain at $7,000 (or $8,000 if you’re eligible for the catch-up contribution).
HSA Limits
Health Savings Accounts (HSAs) remain a fantastic tax-advantaged way to save for healthcare expenses. For 2025, the HSA contribution limits are increasing from $4,150 for singles and $8,300 for family plans to $4,300 and $8,550, respectively. The additional $1,000 catch-up for those over 55 is unchanged.
FSA Limits
Flexible Spending Account (FSA) limits are getting a $100 increase, moving from $3,200 in 2024 to $3,300 in 2025.
Social Security COLA Increase
The Social Security cost-of-living adjustment (COLA) for 2025 is set at 2.57%, reflecting a cooling in inflation rates.
Social Security Taxable Income
In 2025, Social Security tax applies to the first $176,100 of income, up from $168,600 in 2024. This is the income threshold before deductions are applied for Social Security.
Standard Deduction Increase
For those taking the standard deduction, there’s good news: in 2025, the deduction rises to $15,000 for single filers and $30,000 for married couples filing jointly—an increase of $400 and $800, respectively.
Annual Gift Tax Exclusion
In 2025, the annual gift tax exclusion increases to $19,000 per person, up from $18,000. You can gift this amount to as many individuals as you’d like without triggering a gift tax.
Lifetime Estate Tax Credit
The lifetime estate tax exemption rises to $13,990,000 per individual, a significant increase that may impact estate planning strategies for high-net-worth individuals.
Total Retirement Account Contribution Cap
The maximum income that can count toward retirement contribution matching rises from $345,000 in 2024 to $350,000 in 2025.
Roth IRA Phase-Out Limits
The Roth IRA income phase-out range increases in 2025. For single filers, the phase-out starts at $150,000 and ends at $165,000, up from the 2024 range of $146,000–$161,000. For married couples filing jointly, the range is now $236,000–$246,000, up from $230,000–$240,000.
And More…
These are some of the most notable changes for 2025, but additional updates may apply depending on your personal circumstances.
Here’s to a prosperous and well-planned 2025!
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