IRS increases contribution limits for 401(k) and some other retirement plans for 2025

The Internal Revenue Service (IRS) announced Friday that it has increased the amount individuals can contribute to their 401(k) and other retirement plans to account for inflation.

Each year, the IRS reviews the tax thresholds and limitations for various retirement accounts and considers a cost-of-living adjustment based on the impact of inflation since the last change.

For the 2025 tax year, the IRS is increasing the annual contribution limit for 401(k) plans by $500 from the current limit of $23,000 in 2024 to $23,500 in 2024.

These limits also apply to several other retirement plans and will increase equally for tax year 2025, including 403(b) retirement plans, state 457 plans, and the federal government's Thrift Savings Plan.

IRS sets new tax limits and increases standard deduction for 2025

The IRS is also considering adjustments to contribution limits for individual retirement accounts (IRAs), including traditional and Roth IRAs. However, the IRS will keep IRA annual contribution limits constant at $7,000 from 2024 to 2025. Additionally, the IRA catch-up contribution limit for those age 50 and older will remain at $1,000 for 2025.

The catch-up contribution limit that applies to employees age 50 and older enrolled in most 401(k), 403(b), and government 457 plans Savings plan will remain at $7,500 for 2025. Workers age 50 and older generally may contribute up to $31,000 annually to these retirement plans beginning in 2025, subject to changes made with the passage of the SECURE 2.0 Act of 2022.

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This law also created a higher catch-up contribution limit for workers ages 60 to 63 participating in these plans – increasing to $11,250 in 2025, up from $7,500.

The IRS has also adjusted the thresholds under which taxpayers can contribute to and receive a traditional IRA Tax deduction for their contribution.

The IRS maintained the contribution limits for IRAs, but increased the deduction phase-out range for traditional IRAs and the contribution phase-out range for Roth IRAs. (J. David Ake/Getty Images / Getty Images)

For individual taxpayers who are also covered by a corporate retirement plan, the range for the traditional IRA contribution tax deduction is increased from $77,000 to $87,000 to $79,000 to $89,000. For married couples filing joint returns, the phase-out range increases to $126,000 to $146,000, an increase of $3,000 from last year.

The income phase-out range for taxpayers contributing to a Roth IRA has been increased to $150,000 to $165,000 for individuals and heads of household – from $146,000 to $161,000. For married couples filing jointly, the phase-out range increases by $6,000 to $236,000 to $246,000.

Each year, the IRS may review and update contribution and eligibility thresholds for retirement accounts such as 401(k) and IRA accounts to adjust for inflation. (iStock / iStock)

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The Saver's loanThe amount, also known as the Retirement Savings Contributions Credit, for low- and moderate-income workers is $39,500 for individuals, $79,000 for married couples filing jointly and $59,250 for heads of household.