Each year, the IRS announces adjustments to tax brackets and contribution amounts to tax advantaged accounts to keep up with inflation.
Tax brackets
The IRS announced the federal income brackets last October which Raised each income threshold by roughly 2.8% for 2025. This is less than it was for 2024, where brackets raised about 5.4%.
Marginal Tax Rates for 2025
37% for single taxpayers with incomes over $626,350 and $751,600 for married couples filing jointly
35% for incomes over $250,525 and $501,050 for married couples filing jointly
32% for incomes over $197,300 and $394,600 for married couples filing jointly
24% for incomes over $103,350 and $206,700 for married couples filing jointly
22% for incomes over $48,475 and $96,950 for married couples filing jointly
12% for incomes over $11,925 and $23,850 for married couples filing jointly
10% for incomes $11,925 or less and $23,850 or less for married couples filing jointly
The standard deduction has increased to by $400 in 2025 to $15,000 for single filers and by $800 to $30,000 for married couples filing jointly.
Social Security taxable income threshold has also increased. Social security tax now applies to the first $176,100 of income in 2025, up from $168,600 in 2024. This means paying an extra $465 in 2025 to social security taxes for salaries above $176,100.
Contributions to Retirement Accounts
Employee 401K, 403B and 457 plan contribution limits increased by $500 from $23,000 in 2024 to $23,500 in 2025 If you are age 50 to 59 or 64 or older, you are eligible for an additional $7,500 in catch-up contributions for a total of $31,000 for 2025. Starting this year, in 2025, people age 60 to 63 can contribute up to an additional 11,250 as a catch-up contribution for a total of $34,750.
The Secure 2.0 Act introduced a super catch-up contribution specifically for individuals between the ages of 60 to 63 to help older workers boost their retirement savings. Why 60 to 63 and not 60 or older, I have no idea but it certainly does add more complexity.
These contribution limits are the same for both traditional and Roth accounts 401K and 403B accounts. There is no Roth version of the 457 plan. If you have access to both Roth and Traditional retirement accounts, from example, you employer offers both the Roth 401K and a Traditional 401K, you can contribute to both your total employee contribution is still limited across all accounts. If you are under age 50, you can put $23,500 in contributions across all 401K accounts, no matter how many different 401K accounts you have. If you change jobs and have a 401K with a new employer, your contribution limit still applies to that account.
Employers can contribute to your retirement account as well, so if you have your own private practice, or you have 1099 income as an independent contractor, you can contribute as an employer as well. The max mount of employer contributions is 47,500, or 25% of the employee’s compensation, which ever is less. There is a salary cap o $350,000 for the employer contribution, so if your salary is more than $350,000, your employer can only contribute to your 401K or 403B as if your salary was $350,000 for 2025, including if you are your own employer, ie. you are self-employed. You can still contribute the maximum amount of the employee contribution. The salary cap in 2025 was $345,000.
While there was an increase in contribution limits for 401Ks and 403Bs, the contribution limits for IRAs didn’t change. For 2025, you can contribute $7,000 if you are under 50 and $8,000 if you are older 50 to a traditional or Roth IRA, or through the backdoor method.
Defined benefit plans have a contribution limit of $280,000 for 2025, up $5,000 from 2024 limit of $275,000. The limit for Define contribution plans has increased to $70,000 from $69,000 for a $1,000 increase.
Medical Accounts
Health Savings accounts limits increased for 2025. Individuals can now contribute $4,300, up from $4150 in 2024, and families can contribute $8550, up from $8,300. There is a 1,000 catch up for those 55 and older that has not changed.
Flexible spending accounts saw a minimal increase from $3,200 to 2024 to $3,300 in 2025.
Other
Other notable increases is the annual gift exclusion, which is $19,000 per recipient for 2025, up from 18,000 in 2024. The lifetime estate tax exemption has increased as well, from $13,6 million per individual in 2024 to $13.99 million in 2025.
Have a great 2025!
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