2025 401(k) and IRA contribution limits: What you need to know
The IRS has announced higher contribution limits for 401(k) plans starting in 2025. The maximum tax-free contribution will rise from $23,000 to $23,500. In addition, the same change applies to 403(b) and other employee-sponsored retirement accounts.
Americans nearing retirement will benefit from a larger tax incentive. For the first time, the “catch-up” contribution limit for those aged 60 to 63 will increase. It will rise from $7,500 to $11,250.
Moreover, more lower- and moderate-income workers may qualify for the Retirement Saver’s Credit. This credit provides a dollar-for-dollar reduction in tax bills based on retirement savings. For example, single filers with incomes up to $39,500 will qualify, up from $38,350 in 2024. Likewise, for heads of household, the threshold increases to $59,250, up from $57,375. Married couples filing jointly can earn up to $79,000, an increase from $76,500.
However, for those contributing to IRAs or Roth IRAs, the annual contribution limit remains at $7,000.
These changes are part of a 2025 cost-of-living adjustment, according to the IRS.
This blog post has been sourced from TheStreet
