In “The Bottom Line,” President Trump donor Norm Champ details how the Biden-Harris rule is hurting Americans’ retirement savings.
The Internal Revenue Service (IRS) announced Friday that it has increased the amount individuals can contribute to 401(k)s and other retirement plans to account for inflation.
Each year, the IRS reviews the tax thresholds and limits for various retirement accounts and considers cost-of-living adjustments based on the effects of inflation since the last change.
For the 2025 tax year, the IRS will increase the annual contribution limit for 401(k) plans to $23,500 in 2024, an increase of $500 from the current limit of $23,000 in 2024.
These limits also apply to several other retirement plans, including 403(b) retirement plans, government 457 plans, and federal thrift savings plans, which will see similar increases in the 2025 tax year. is.
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The IRS has increased contribution limits and catch-up contribution standards for 401(k) plans and similar retirement accounts. (Reuters/Reuters Photo)
The IRS is also considering adjusting contribution limits for individual retirement accounts (IRAs), including traditional IRAs and Roth IRAs. However, the IRS will lock the annual IRA contribution limit at $7,000 from 2024 to 2025. It would also maintain the IRA catch-up contribution limit at $1,000 through 2025 for individuals age 50 and older.
The catch-up contribution limit for employees age 50 and older who participate in most 401(k)s, 403(b)s, government 457 plans, and thrift savings plans will remain at $7,500 in 2025. is. Employees age 50 and older typically contribute up to $31,000 annually to a retirement plan starting in 2025 under changes associated with the enactment of the SECURE 2.0 Act of 2022.
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The legislation would also create higher contribution limits for workers ages 60 to 63 who participate in these plans, increasing to $11,250 instead of $7,500 in 2025.
The IRS also adjusted the threshold at which taxpayers can contribute to a traditional IRA and receive a tax deduction for those contributions.
The IRS has left IRA contribution limits unchanged, but expanded the deduction phase-out range for traditional IRAs and the contribution phase-out range for Roth IRAs. (J. David Eyck/Getty Images/Getty Images)
For individual taxpayers who also participate in a workplace retirement plan, the traditional IRA contribution tax deduction phaseout range increases from $77,000 to $87,000 to $79,000 to $89,000. For married couples filing joint tax returns, the phaseout range increases from $126,000 to $146,000, an increase of $3,000 from last year.
The income phase-down range for taxpayers contributing to a Roth IRA increased from $146,000 to $161,000 to $150,000 to $165,000 for individuals and heads of households. For married couples filing jointly, the phaseout range increases by $6,000, from $236,000 to $246,000.
The IRS may review and update the contribution and eligibility standards for retirement accounts, such as 401(k) and IRA accounts, annually to adjust for inflation. (license/image)
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The Savers Credit, also known as the Retirement Savings Contribution Credit, is for low- and moderate-income workers and is $39,500 for individuals, $79,000 for married couples filing jointly, and $59,250 for heads of households. .
