Important IRS Updates 2025: What You Need to Know

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 take a look at some important updates for 2025 – because who doesn’t enjoy crunching some numbers?

401(k) and 403(b) contribution limits.

Good news! In 2025, the employee contribution limit for 401(k) and 403(b) plans will increase to $23,500 for those under age 50 (from $23,000 in 2024). Catch-up contributions for those age 50 and older remain at $7,500. However, if you are 60 to 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 will also increase in 2025. For those under 50, the cap increases from $69,000 to $70,000 and for those 50 and over to $77,500. If you’re 60-63, the total limit, including catch-up contributions, rises to $81,250.

SEP IRA contribution limits

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

Traditional and Roth IRA contribution limits

There are no changes here – the contribution limits for traditional IRAs and Roth IRAs remain at $7,000 (or $8,000 for those eligible for catch-up contributions). Not the most exciting update, is it?

HSA contribution limits

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

FSA contribution limits

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

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

In 2025, Social Security tax will be levied on the first $176,100 of income, up from $168,600 in 2024.

Standard deduction increase

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

Annual Gift Exclusion

The annual gift tax exclusion limit will increase from $18,000 to $19,000 per recipient in 2025. Feel free to spread Christmas cheer – tax-free!

Lifetime exemption from inheritance tax

The per-person estate tax exemption increases to $13.99 million in 2025 (from $13.6 million in 2024), providing additional planning opportunities for high-net-worth individuals.

Increase in the pension contribution base

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

Roth IRA discontinued range

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

There is 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 any questions or would like to find out how these adjustments could affect your finances, our planning and tax teams are happy to help.

I wish you a happy, healthy and successful year 2025!

Diversified is a registered investment advisor, and registration as an investment advisor does not imply any particular 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 document, which discusses, among other things, the Company’s business practices, services and fees, is available on the SEC’s website at: www.adviserinfo.sec.gov.

Diversified, LLC does not provide tax advice and should not be relied upon to file taxes, estimate tax liability, or avoid statutory taxes or penalties. The information provided by Diversified LLC should not be a substitute for the advice of a qualified tax advisor, accountant or other professional regarding the application of tax law or an individual tax situation.

Nothing in this article constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding the tax consequences of investments. Investing in securities involves risks and is not suitable for all investors. This website does not constitute a recommendation or an offer to sell (or the solicitation of an offer to buy) any securities in the United States or any other jurisdiction.

This article was written by and represents the views of our contributing consultant, not those of Kiplinger’s editorial team. You can check the consultant documents with the SEC or with FINRA.

401(k) and 403(b) contribution limits.

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