IRS raises contribution limits for 401(k), other retirement plans by 2025
Trump contributor Norm Champ explains how the Biden-Harris rules would hurt Americans’ retirement savings in ‘The Bottom Line.’
It’s officially 2025 and it’s a good time to revisit your retirement planning.
I Internal Revenue Service (IRS), In November, it announced that it increased the amount people can put into their 401(k) and other retirement plans to offset inflation.
Each year, the IRS reviews the tax limits and limits for various retirement accounts and considers making cost-of-living adjustments based on the impact of inflation since the previous change.
For the 2025 tax year, the IRS is raising the annual contribution limit 401(k) plans by $500 from the current limit of $23,000 in 2024 to $23,500 in 2025.
Those limits also apply to several other retirement plans and will increase similarly in the 2025 tax year, including 403(b) retirement plans, state 457 plans and the federal government’s Thrift Savings Plan.
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The IRS has proposed contribution limits and withholding contribution limits for 401(k) plans and similar retirement accounts. (Photos by Reuters / Reuters)
The IRS is also considering changes to contribution limits for Individual Retirement Accounts (IRAs), including traditional and Roth IRAs. However, the IRS will cap annual IRA limits from 2024 to 2025 at $7,000. It also keeps the IRA contribution limit for people age 50 and older at $1,000 through 2025.
The replacement contribution limit applies to employees age 50 and older enrolled in 401(k), 403(b), 457 government plans and Thrift Savings Plan it will remain at $7,500 in 2025. Workers age 50 and older can typically contribute up to $31,000 a year to those retirement plans starting in 2025 under changes made by the enactment of the SECURE 2.0 Act of 2022.
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That law also created a higher contribution limit for workers ages 60 to 63 participating in those plans — which will be increased to $11,250 instead of $7,500 by 2025.
The IRS has also adjusted the thresholds at which taxpayers can contribute to a traditional IRA and receive tax deduction for their contribution.
The IRS kept the contribution limits for IRAs unchanged, but increased the deduction threshold for traditional IRAs and the contribution threshold for Roth IRAs. (J. David Ake/Getty Images/Getty Images)
For individual taxpayers who are also covered by a workplace retirement plan, the standard IRA tax exclusion range is increased to between $79,000 and $89,000 – up from $77,000 and $87,000. For married couples filing joint tax returns, the exclusion range increases to between $126,000 and $146,000, which is a $3,000 increase from last year.
The income threshold for taxpayers contributing to a Roth IRA increased to between $150,000 and $165,000 for individuals and heads of households – up from between $146,000 and $161,000. For married couples filing jointly, the threshold increases by $6,000 to between $236,000 and $246,000.
The IRS reviews and revises the contribution and eligibility limits for retirement accounts such as 401(k) accounts and IRA accounts each year to adjust for inflation. (iStock / Stock)
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I Conservator’s Creditalso known as the Retirement Savings Contributions Credit, for low-income and low-income workers it is $39,500 for individuals, $79,000 for married couples filing jointly and $59,250 for heads of households.
This article was originally published on November 1, 2024.
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