IRS Announces 401(K) Limit Increases to $23,500 for 2025, IRA Limit Remains $7,000

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November 4, 2024 – WASHINGTON — The Internal Revenue Service announced that the amount individuals can contribute to their 401(k) plans has increased to $23,500 in 2025, up from $23,000 in 2024.

The IRS also today issued technical guidance regarding all cost-of-living adjustments that impact the dollar limitations for retirement plans and other retirement-related items for tax year 2025. Notice 2024-80 PDFposted today on IRS.gov.

Highlights of the changes for 2025

The annual contribution limit for employees participating in 401(k), 403(b), government 457 plans and the federal government’s Thrift Savings Plan will increase from $23,000 to $23,500.

The limit for annual contributions to an IRA remains $7,000. The IRA catch-up contribution limit for individuals age 50 and older was amended under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost-of-living adjustment, but remains $1,000 for 2025.

The catch-up contribution limit that typically applies to employees age 50 and older who participate in most 401(k), 403(b), government 457 plans, and the federal government’s Thrift Savings Plan remains $7,500 for 2025. Therefore, participants in most 401s remain (k), 403(b), government 457 plans and the federal government’s Thrift Savings Plan, those ages 50 and older can generally contribute up to $31,000 per year beginning in 2025. Thanks to a change in SECURE 2.0, a higher catch- The contribution limit applies to employees aged 60, 61, 62 and 63 who participate in these schemes. For 2025, this higher catch-up contribution limit will be $11,250 instead of $7,500.

The income ranges for determining eligibility to make deductible contributions to traditional individual retirement arrangements (IRAs), to contribute to Roth IRAs and to claim the savings credit have all increased for 2025.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If the taxpayer or the taxpayer’s spouse was covered by a workplace retirement plan during the year, 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 workplace retirement plan, the phase-out of the deduction does not apply.) Here are the phase-out ranges for 2025:

• For single taxpayers covered by a workplace retirement plan, the phase-out range increases from between $77,000 and $87,000 to $79,000 to $89,000.
• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range increases to between $126,000 and $146,000, up from between $123,000 and $143,000.
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range increases to between $236,000 and $246,000, up from between $230,000 and $240,000.
• For a married individual filing a separate return and covered by a workplace retirement plan, the phase-out margin is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
• The income phase-out range for taxpayers contributing to a Roth IRA increases from $146,000 to $161,000 for singles and heads of household, from $150,000 to $165,000. For married couples filing jointly, the income reduction range will increase from between $230,000 and $240,000 to $236,000 to $246,000. The phase-out range for a married individual filing a separate return and making 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 people filing separately, up from $38,250.
• The amount individuals can typically contribute to their SIMPLE retirement accounts will increase from $16,000 to $16,500. As a result of a change in SECURE 2.0, individuals may contribute an increased amount to certain applicable SIMPLE retirement accounts. For 2025, this higher amount remains $17,600.
• The catch-up contribution limit generally applicable to employees age 50 and older participating in most SIMPLE plans remains $3,500 through 2025. A change in SECURE 2.0 will apply a different catch-up limit to employees age 50 and older participating in certain applicable SIMPLE plans . For 2025, this limit will remain $3,850. Due to a change in SECURE 2.0, a higher catch-up contribution limit applies to employees aged 60, 61, 62 and 63 who participate in SIMPLE plans. For 2025, this higher catch-up contribution limit is $5,250.

Details on these and other pension-related cost of living adjustments for 2025 have been received Notice 2024-80 PDFavailable at IRS.gov.
Source: tax authorities