The Internal Revenue Service (IRS) has announced an increase in the contribution limits for various retirement accounts in 2025. Individuals will now be able to contribute up to $23,500 to their 401(k) plans, up from $23,000 in 2024. This adjustment is part of the annual cost-of-living adjustments for pension plans and other retirement accounts.
Workers participating in 403(b) plans and the federal government’s Thrift Savings Plan will also see their contribution limits raised to $23,500 in 2025, up from $23,000 in the previous year. However, the annual contribution limit for Individual Retirement Accounts (IRAs) will remain unchanged at $7,000 for 2025, with the IRA catch-up contribution limit for individuals aged 50 and over staying at $1,000.
In addition to the retirement account adjustments, the IRS also announced changes to the standard deduction amounts for the 2025 tax year. Single taxpayers and married individuals filing separately will see their standard deduction increase to $15,000, a $400 rise from 2024. For married couples filing jointly, the standard deduction will be $30,000 in 2025, an $800 increase from the previous year. Heads of households will have a standard deduction of $22,500, up $600 from 2024.
Furthermore, income thresholds for all seven federal tax bracket levels have been adjusted upwards to account for inflation. These changes aim to provide taxpayers with increased benefits and deductions to help manage their finances effectively.
Lastly, the Social Security Administration recently announced a 2.5% cost-of-living increase for benefits recipients starting in January. This adjustment will result in an average monthly increase of over $50 for millions of beneficiaries, providing them with additional financial support.
