2025 Tax Changes

The Internal Revenue Service recently announced a change in the amount individuals can contribute to their 401(k) plans. Starting in 2025 the annual contribution limit for employees who participate in 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan is increased to $23,500, up from the prior amount of $23,000.

The limit on annual contributions to an IRA remains the same at $7,000. Another amount remaining the same is the catch-up contribution limit for individuals aged 50 and over, which will remain at $7,500 for 2025. However, thanks to a change enacted by SECURE 2.0, employees aged 60-63 that participate in these plans have a higher catch-up contribution limit in 2025- $11,250 instead of $7,500.

The income ranges for determining eligibility to make deductible contributions to traditional IRAs and Roth IRAs increase for 2025. These ranges differ based on filing status and filing conditions.

There are many other notable tax changes, of which a full list can be found on the IRS website. 

• The standard deductions have increased:

• Marginal rates-while the percentages remained the same, the income amounts that define them increased.

• For qualifying taxpayers with three or more qualifying children, the Earned Income Tax Credit for 2025 is $8,046. This is an increase from the 2024 amount of $7,830.

• Annual exclusion for gifts increases to $19,000 in 2025, $1,000 more than the 2024 amount.

If you have questions regarding the tax implications of these changes please contact us.  At Hark and Associates, PC, we are here to provide high quality service with the highest ethical standards in the business of CPA firms.