Internal Revenue Service Boosts 401(k) Contribution Limits Amid Inflation
IRS Increases Contribution Limits for 2025
The Internal Revenue Service has declared that starting in 2025, workers can now contribute up to $23,500 to their 401(k) plans, slightly up from $23,000 in 2024. This increase is part of the annual review of cost-of-living adjustments for pension plans amid ongoing inflation.
Details of the Adjustments
- Annual contributions for 403(b) plans and the Thrift Savings Plan will also reach $23,500.
- The limit on contributions to an IRA remains $7,000, and the catch-up amount for individuals aged 50 and older stays at $1,000.
Standard Deductions Revised
Effective for tax year 2025, the standard deduction for single filers will rise to $15,000, while joint couples will see theirs increase to $30,000.
Impact on Tax Brackets
- All seven federal tax brackets are now adjusted upward.
- Taxpayers should review these changes to understand their new obligations.
Social Security Updates
Moreover, the Social Security Administration announced a 2.5% increase in benefits, but advocates worry that this modest raise will leave retirees at financial risk.
With adjustments being made across the board, taxpayers must remain informed about how these changes will affect personal finances in 2025.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.