As you make your plans for the coming year, it’s important to take note of the changes in contribution limits and other tax changes in 2025. The information that follows was gathered from the IRS and other relevant government agencies.
Social Security
Social Security payments will increase 2.5% in 2025.
401(k)
I view 401(k) plans as a high priority — especially if your employer does contribution matching. For the under-50 crowd, you can contribute $23,500 this year – a $500 increase. If you’re 50 or older, you can also use the catch-up contribution which will be $7,500 – same as 2024. In 2025, if you are between the ages of 60 and 63 by the end of the calendar year, your catch-up contribution will be $11,250 (rather than the $7,500 for those in the 50-60 age range).
IRA
For both traditional and Roth IRAs, contribution limits will be the same as 2024, $7,000. Catch-up contributions for those 50 and older also remain unchanged at $1,000. For traditional IRAs, whether these contributions are deductible depends on something called your Modified Adjusted Gross Income or MAGI. (That’s basically your Adjusted Gross Income with certain deductions added back in.)
For traditional IRAs, joint filers who have a MAGI of less than $150,000 may deduct their entire contribution. Those with a MAGI greater than $165,000 can’t deduct anything. (The deduction amount is phased between those two thresholds.)
For a Roth IRA, there is no deduction since it’s funded with post-tax dollars. There is however, a MAGI limit as to whether any contribution is permitted. For joint-filers with income is less than $236,000, they may make the full $7,000 contribution to their Roth IRA. No contributions may be made with a MAGI above $246,000. (The limit is phased between those two levels.)
Tax Rates
Marginal tax rates remain unchanged in 2025. The dollar thresholds for particular brackets have increased due to inflation. Here are the rates for single and married joint filers for 2025. (That is, for income earned in 2025 which will be taxed in 2026.)
- 37% for incomes over $626,350 (over $751,600 for married couples filing jointly)
- 35% for incomes over $250,525 (over $501,050 for married couples filing jointly)
- 32% for incomes over $197,300 (over $394,600 for married couples filing jointly)
- 24% for incomes over $103,350 (over $206,700 for married couples filing jointly)
- 22% for incomes over $48,475 (over $96,950 for married couples filing jointly)
- 12% for incomes over $11,925 (over $23,850 for married couples filing jointly)
- 10% for incomes of $11,925 or less ($23,850 or less for married couples filing jointly)
Standard Deduction
The standard deduction for those who do not itemize will increase to $15,000 for single filers and $30,000 for married couples filing a joint return.
Here’s an early warning for 2026 taxes: Unless congress acts, the standard deduction will revert to pre- Tax Cuts and Jobs Act of 2017 (TCJA) levels (adjusted for inflation). This means the deduction amounts will be substantially lower than the amounts in effect from 2018 to 2025. As an example, the married-filing-jointly deduction is expected to be around $14,000 (down from ~$30,000 in 2025).
Estate Taxes
Estates will be exempt from Federal taxes up to $13,990,000 per person. The limit in 2024 was from $13,610,000.
Required Minimum Distributions
Required Minimum Distributions (RMDs) are the minimum amounts you must withdraw from your retirement accounts each year. You generally must start taking withdrawals from your traditional IRA, SEP IRA, SIMPLE IRA and retirement plan accounts when you reach age 72 (73 if you reach age 72 after Dec. 31, 2022).
Account owners in a workplace retirement plan (for example, 401(k) or profit-sharing plan) can delay taking their RMDs until the year they retire, unless they’re a 5% owner of the business sponsoring the plan.
Roth IRAs do not require withdrawals until after the death of the owner. At that time, a spouse who inherited a deceased partner’s IRA can roll the funds into their own IRA or an Inherited IRA. Other beneficiaries may be subject to the 10-year distribution rule. This rule requires all assets in the account to be distributed by the end of the 10th year from when the original account owner died.
As a reminder, there was a change for Roth accounts that are held in 401(k) or 403(b) plans for 2024 and later years. They no longer require RMDs.
Health Savings Account (HSA)
A Health Savings Account (HSA) is a personal savings account that lets you set aside money to pay for qualified medical expenses such as deductibles, copayments, coinsurance and some dental, drug, and vision expenses. You can use HSA funds tax-free, and the interest earned on your account is also tax-free. You can also deduct your voluntary contributions to your HSA from your taxable income. To be eligible for an HSA, you must be covered by an HSA-eligible plan, also known as a High Deductible Health Plan (HDHP). With HDHPs, you usually pay more out-of-pocket for health care costs before your insurance company starts to pay.
The HSA contribution limit for 2025 is $4,300 for self-only coverage and $8,550 for family coverage. This is an increase of $150 for individuals and $250 for families from 2024. Individuals 55 and older may contribute an additional $1,000.
Health Flexible Spending Account (FSA)
A Health Flexible Spending Account (FSA) is an employee benefit that allows you to set aside pre-tax money to pay for certain healthcare expenses such as insurance copayments and deductibles, qualified prescription drugs, insulin, medical devices, contact lenses and eyeglasses, dental cleanings and hearing aids.
An employee who chooses to participate in an FSA may contribute up to $3,300 through payroll deductions during the 2025 plan year. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax. If the plan allows, the employer may also contribute to an employee’s FSA. Also, if your plan permits, up to $660 may be rolled over for a FSA in 2025. This is an increase from the 2024 maximum of $640
Naturally there are other changes in the tax laws and there are a lot of details as to what applies to whom. So, if you’d like to discuss how the 2025 tax rules affect your situation, or any other financial matters, we can discuss this in a no-charge, no-obligation initial meeting. Please visit our website or give us a call at 970.419.8212 to set up an in-person or virtual meeting.
This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Please consult your tax or investment advisor for specific advice.