IRS increases 401(k) and other retirement plan contribution limits for 2025

Internal Revenue Service (IRS) On Friday, it announced it was increasing the amount individuals can contribute to 401(k) and other retirement plans to account for inflation.

Each year, the IRS reviews the tax thresholds and limitations for various retirement accounts and considers cost-of-living adjustments based on the impact of inflation since the previous change occurred.

For tax year 2025, IRS increases annual contribution limit 401(k) plans Increased by $500 from the current $23,000 limit in 2024 to $23,500 in 2024.

These limits also apply to some other retirement plans and will be subject to the same increase for the 2025 tax year, including 403(b) retirement plans, government 457 plans and the federal government’s Thrift Savings Plan.

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The IRS increased contribution limits and catch-up contribution thresholds for 401(k) plans and similar retirement accounts.(Photo: ADEM ALTAN/AFP via Getty Images)

The IRS is also considering adjustments to contribution limits for Individual Retirement Accounts (IRAs). traditional and Roth IRAs. However, the IRS will keep IRA annual contribution limits flat at $7,000 from 2024 through 2025. It also maintains the IRA catch-up contribution limit for individuals age 50 and over at $1,000 through 2025.

Catch-up contribution limit available to employees age 50 and older enrolled in most 401(k), 403(b), government 457 plans, and 403(b) Savings Savings Plan It will remain at $7,500 for 2025. Workers age 50 and older can generally contribute up to $31,000 annually to retirement plans starting in 2025 under changes made with the passage of the SECURE 2.0 Act of 2022.

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This law also established a higher catch-up contribution limit for workers ages 60 to 63 who participate in these plans; This limit will be increased to $11,250 instead of $7,500 in 2025.

The IRS also adjusted the thresholds at which taxpayers can contribute to a traditional IRA and receive taxes. tax deduction for their contributions.

The IRS kept contribution limits for IRAs constant, but increased the deduction phase-out range for traditional IRAs and the contribution phase-out range for Roth IRAs. (J. David Ake/Getty Images

For individual taxpayers who are also covered by a workplace retirement plan, the traditional IRA contribution tax deduction phaseout range is increased from $77,000 to $87,000 to $79,000 to $89,000. The phaseout range for married couples filing joint tax returns increases to $126,000 to $146,000, up $3,000 from last year.

The income phase-out range for taxpayers contributing to a Roth IRA increased from $146,000 to $161,000 for individuals and heads of households to between $150,000 and $165,000. For married couples filing jointly, the phaseout range increases by $6,000 to between $236,000 and $246,000.

Savings LoanAlso known as the Retirement Savings Contribution Credit, $39,500 for individuals, $79,000 for married couples filing jointly, and $59,250 for heads of household for low- and moderate-income workers.

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