The IRS announced on Nov. 1 that the amount individuals can contribute to their 401(k) plans next year has risen to $23,500 from $23,000 in 2024.
The agency also issued technical guidance regarding all cost‑of‑living adjustments impacting dollar limitations for pension plans and other retirement-related items for tax year 2025 in Notice 2024-80.
In terms of the highlights of the announcement, the IRS said that the annual contribution limit for employees who are part of a 401(k), 403(b), governmental 457 plans and the federal government’s Thrift Savings Plan has risen to $23,500 from $23,000.
Meanwhile, the limit on annual contributions to an IRA will stay at $7,000. The IRA catch‑up contribution limit for individuals aged 50 and over was changed under the SECURE 2.0 Act of 2022 to include an annual cost‑of‑living adjustment, but remains at $1,000 for 2025.
The catch-up contribution limit that generally applies to 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 at $7,500 for 2025. Therefore, participants in most of these plans who are 50 and older generally can contribute up to $31,000 annually, beginning in 2025.
Under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in these plans. For 2025, this higher catch-up contribution limit is $11,250 instead of $7,500.
The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the Saver’s Credit all rose for 2025.
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. Suppose, during the year, a retirement plan at work covers either the taxpayer or the taxpayer’s spouse; in that case, the deduction may be reduced or phased out until it is eliminated, depending on filing status and income. If a retirement plan at work covers neither the taxpayer nor the spouse, the phase-outs of the deduction are not applicable.
The phase‑out ranges for 2025 are:
• For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $79,000 and $89,000, up from between $77,000 and $87,000.
• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $126,000 and $146,000, up from between $123,000 and $143,000.
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is, the phase-out range has been increased to between $236,000 and $246,000, up from between $230,000 and $240,000.
• The phase-out range is not subject to an annual cost-of-living adjustment for a married individual filing a separate return covered by a workplace retirement plan. It remains between $0 and $10,000.
• The income phase-out range for taxpayers contributing to a Roth IRA is increased to between $150,000 and $165,000 for singles and heads of household, up from $146,000 to $161,000. For married couples filing jointly, the income phase-out range is increased to between $236,000 and $246,000, up from $230,000 to $240,000. The phase-out range for a married individual filing a separate return who contributes to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
• The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $79,000 for married couples filing jointly, up from $76,500; $59,250 for heads of household, up from $57,375; and $39,500 for singles and married individuals filing separately, up from $38,250.
• The amount individuals can generally contribute to their SIMPLE retirement accounts is increased to $16,500, up from $16,000. Under a change made in SECURE 2.0, individuals can contribute more to certain applicable SIMPLE retirement accounts. For 2025, this higher amount remains $17,600.
• The catch-up contribution limit that generally applies for employees aged 50 and over who participate in most SIMPLE plans remains $3,500 for 2025. Because of a change made in SECURE 2.0, a different catch-up limit applies to employees aged 50 and over participating in certain applicable SIMPLE plans. For 2025, this limit remains $3,850. Under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in SIMPLE plans. For 2025, this higher catch-up contribution limit is $5,250.