IRS Announces 2025 inflation adjusted amounts

The income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs, and to claim the saver's credit all increased for 2025.  The IRS announced the 2025 benefit and contribution limits for qualified retirement plans, including contribution limits for Sec. 401(k) plans and individual retirement arrangements (IRAs) Friday, increasing the limit on 401(k)s by $500.

Notice 2024-80 includes updates to dollar limits for a range of qualified retirement plans and accounts, including traditional and Roth IRAs.

The amount that individuals can contribute to 401(k) plans will increase to $23,500 in 2025, up from $23,000 in 2024. The new amount also applies to Sec. 403(b) and most Sec. 457 plans, as well as the federal government's Thrift Savings Plan.  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.  Participants in these plans who are 50 and older generally can contribute up to $31,000 each year, starting in 2025.

Under a change made in the SECURE 2.0 Act of 2022 (Division T of the Consolidated Appropriations Act, 2023, P.L. 117-328), a higher catch-up contribution limit applies for employees aged 60, 61, 62, and 63 who participate in these plans, the notice said. For 2025, this higher catch-up contribution limit is $11,250, up from $7,500 in 2024.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer's spouse was covered by a retirement plan at work, the deduction may be reduced or phased out until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phaseouts of the deduction do not apply.)

The limit on annual contributions to traditional and Roth IRAs remains at $7,000, and the IRA catch-up contribution limit for individuals 50 and older remains $1,000 for 2025.  For traditional IRAs, the following phaseout ranges apply for 2025:

For single taxpayers covered by a workplace retirement plan, the phaseout 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 phaseout range is increased to between $126,000 and $146,000, up from between $123,000 and $143,000.   For an IRA contributor not covered by a workplace retirement plan and married to someone who is covered, the phaseout range is increased to between $236,000 and $246,000, up from between $230,000 and $240,000.   For a married individual filing a separate return who is covered by a workplace retirement plan, the phaseout range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

The income phaseout range for taxpayers making contributions to a Roth IRA is increased to between $150,000 and $165,000 for singles and heads of household, up from between $146,000 and $161,000. For married couples filing jointly, the income phaseout range is increased to between $236,000 and $246,000, up from between $230,000 and $240,000. The phaseout range for a married individual filing a separate return who makes contributions 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.