IRS increases 401(k) limit for 2025 but keeps IRA limit the same
The Internal Revenue Service has announced that the amount individuals can contribute to their 401(k) plans in 2025 has increased by $500 to $23,500, up from $23,000 for 2024, as part of its annual cost-of-living adjustments. The catch-up contribution limit that generally applies for employees aged 50 and over who participate in most 401(k), 403(b), governmental 457 plans and the federal government's Thrift Savings Plan remains $7,500 for 2025. The limit for individual retirement accounts remains $7,000. The IRA catch up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (also known as SECURE 2.0) to include an annual cost of living adjustment but remains $1,000 for 2025.
IRS releases tax inflation adjustments for tax year 2025
Annual exclusion for gifts - increases to $19,000 for calendar year 2025, rising from $18,000 for calendar year 2024.
Estate tax credits - Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000, increased from $13,610,000 for estates of decedents who died in 2024.
Standard deductions - For single taxpayers and married individuals filing separately for tax year 2025, the standard deduction rises to $15,000 for 2025, an increase of $400 from 2024. For married couples filing jointly, the standard deduction rises to $30,000, an increase of $800 from tax year 2024. For heads of households, the standard deduction will be $22,500 for tax year 2025, an increase of $600 from the amount for tax year 2024.
Earned income tax credits - For qualifying taxpayers who have three or more qualifying children, the tax year 2025 maximum Earned Income Tax Credit amount is $8,046, an increase from $7,830 for tax year 2024.