Trump donor Norm Champ describes how the Biden-Harris regulations hurt Americans’ retirement funds on ‘The Bottom Line’.
It’s officially 2025, and it’s a good time to rethink your retirement plans.
The Tax Administration (IRS), announced in November that it 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 limits for various retirement accounts and considers a cost-of-living adjustment based on the impact of inflation since the previous change.
For the tax year 2025, the Tax Administration increases the annual contribution limit by 401(k) plans by $500 from the current limit of $23,000 in 2024 to $23,500 in 2025.
These limits also apply to several other retirement plans and will be subject to the same increase for the 2025 tax year, including 403(b) retirement plans, government 457 plans and the federal government savings plan.
The Tax Administration sets new tax classes, increases standard deductions for 2025.
The IRS has raised contribution limits and reimbursement contribution thresholds for 401(k) plans and similar retirement accounts. (Reuters / Reuters photos)
The IRS is also considering adjustments to individual retirement account (IRA) contribution limits, including traditional and Roth IRAs. However, the IRS will keep annual IRA contribution limits at $7,000 from 2024 to 2025. It also maintains the catch-up IRA contribution limit for people age 50 and older at $1,000 for 2025.
Compensation contribution limit applicable to employees age 50 and older included in most 401(k), 403(b), government 457 plans, and Thrifty savings plan it will remain at $7,500 for 2025. Workers who are 50 and older generally can contribute up to $31,000 a year to those retirement plans starting in 2025 under changes made by the SECURE 2.0 Act of 2022.
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That law also created a higher limit on workers’ compensation contributions for workers ages 60 to 63 participating in those plans — which will increase to $11,250 instead of $7,500 in 2025.
The IRS has also adjusted the thresholds below which taxpayers can contribute to a traditional IRA and receive tax deduction for their contribution.
The IRS kept the contribution limits for IRAs steady, but increased the phase-out range for traditional IRAs and the phase-out range for Roth IRAs. (J. David Ake/Getty Images/Getty Images)
For individual taxpayers who are also covered by a workplace retirement plan, the traditional IRA contribution tax deduction range increases to between $79,000 and $89,000 – from $77,000 to $87,000. For married couples filing joint tax returns, the phase-out range rises to between $126,000 and $146,000, an increase of $3,000 from last year.
The income phase-out range for taxpayers contributing to a Roth IRA increased to between $150,000 and $165,000 for individuals and heads of households — from between $146,000 and $161,000. For married couples filing jointly, the phase-out range increases by $6,000 to between $236,000 and $246,000.
The IRS reviews and possibly updates the contribution and eligibility thresholds for retirement accounts such as 401(k)s and IRAs each year to adjust for inflation. (iStock / iStock)
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The Savings loanalso known as the Retirement Savings Contribution Credit, for low- and moderate-income workers it is $39,500 for individuals, $79,000 for married couples filing jointly, and $59,250 for heads of household.
This article was originally published on November 1, 2024.
