Key 2025 IRS Updates: What You Need to Know

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published 27 December 2024

Each year, the IRS makes adjustments that affect taxes, retirement contributions and savings limits. Planning ahead can help you make the most of these changes.

Let’s dive into some key updates for 2025 — because who doesn’t enjoy crunching a few numbers?

401(k) and 403(b) contribution limits

Good news! In 2025, the employee contribution limit for 401(k) and 403(b) plans increases to $23,500 for those under 50 (up from $23,000 in 2024). Catch-up contributions for those 50 and older remain at $7,500, but if you’re 60-63 by the end of 2025, you can contribute an additional $11,250 as part of the SECURE 2.0 super 401(k) catch-up contribution.

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Total 401(k) contribution limits

The combined employee and employer contribution limit is also going up in 2025. For those under 50, the cap increases from $69,000 to $70,000, and for those 50 and older, it rises to $77,500. If you’re 60-63, the total limit, including catch-up contributions, climbs to $81,250.

SEP IRA contribution limits

Contributing to a SEP IRA? The 2025 limit increases from $69,000 to $70,000.

Traditional and Roth IRA contribution limits

No changes here — contribution limits from traditional IRAs and Roth IRAs remain at $7,000 (or $8,000 for those eligible for catch-up contributions). Not the most exciting update, right?

HSA contribution limits

Health savings account (HSA) limits are increasing! In 2025, individuals can contribute up to $4,300 (up from $4,150), while families can contribute $8,550 (up from $8,300). The $1,000 catch-up for those 55 and older remains unchanged.

FSA contribution limits

Flexible spending accounts (FSAs), the "less fun sibling" of HSAs, see a modest increase from $3,200 in 2024 to $3,300 in 2025.

The cost-of-living adjustment (COLA) for Social Security benefits in 2025 is 2.5%. While it’s a smaller bump (due to lower inflation), it’s still an increase to be thankful for.

In 2025, Social Security tax applies to the first $176,100 of income, up from $168,600 in 2024.

Standard deduction increase

The standard deduction rises in 2025 to $15,000 for single filers (a $400 increase) and $30,000 for married couples filing jointly (an $800 increase).

Annual gift exclusion

The annual gift tax exclusion limit increases from $18,000 to $19,000 per recipient in 2025. Feel free to spread the holiday cheer — tax-free!

Lifetime estate tax exemption

The estate tax exemption per individual jumps to $13.99 million in 2025 (up from $13.6 million in 2024), offering additional planning opportunities for high-net-worth individuals.

Retirement contribution base increase

The maximum income used to calculate retirement plan contributions increases from $345,000 in 2024 to $350,000 in 2025.

Roth IRA phase-out range

For 2025, the Roth IRA income phase-out range increases to $150,000–$165,000 for single filers and $236,000–$246,000 for married filers (up from $146,000–$161,000 and $230,000–$240,000, respectively).

There's more to know

These are just some of the highlights. While not every change will affect you, understanding these updates can help you make smarter financial decisions. If you have questions or want to explore how these adjustments might impact your finances, our planning and tax teams are here to help.

Wishing you a happy, healthy and prosperous 2025!

Diversified is a registered investment adviser, and the registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the SEC.

A copy of Diversified’s current written disclosure brochure which discusses, among other things, the firm’s business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov.

Diversified, LLC does not provide tax advice and should not be relied upon for purposes of filing taxes, estimating tax liabilities or avoiding any tax or penalty imposed by law. The information provided by Diversified LLC should not be a substitute for consulting a qualified tax adviser, accountant or other professional concerning the application of tax law or an individual tax situation.

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Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

In March 2010, Andrew Rosen joined Diversified, bringing with him nine years of financial industry experience. As a financial planner, Andrew forges lifelong relationships with clients, coaching them through all stages of life. He has obtained his Series 6, 7 and 63, along with property/casualty and health/life insurance licenses. Andrew consistently delivers high-level, concierge service to all clients.