While you may still be focused on filing your 2024 tax return in April, now is a great time to start planning for 2025. Familiarizing yourself with updated tax figures, many of which have been adjusted for inflation, can help you make smarter financial decisions throughout the year.
Here are answers to four commonly asked questions about 2025 tax updates:
1. How much can I contribute to an IRA?
If you’re eligible, you can contribute up to $7,000 to a traditional or Roth IRA in 2025 (or up to 100% of your earned income if it’s less). If you’re age 50 or older, you can make an additional $1,000 catch-up contribution. These limits remain the same as they were in 2024.
2. What’s the maximum I can contribute to a 401(k) plan?
For 2025, you can contribute up to $23,500 to a 401(k) or 403(b) plan (an increase from $23,000 in 2024). If you’re age 50 or older, you can add a $7,500 catch-up contribution, which remains unchanged.
New for 2025: Employees aged 60 through 63 can make enhanced catch-up contributions of up to $11,250 (including the $7,500 standard catch-up contribution).
3. How much of my salary is subject to Social Security tax?
The Social Security tax wage base increases to $176,100 for 2025, up from $168,600 in 2024. This means you don’t owe Social Security tax on amounts earned above this threshold. Keep in mind, however, that Medicare tax applies to all earnings without a cap.
4. How much can I gift without triggering a gift tax return?
The annual gift tax exclusion for 2025 is $19,000, up from $18,000 in 2024. You can give this amount to any number of individuals without needing to file a gift tax return.
What Should You Do Next?
These updates represent just a portion of the tax changes that may impact you in 2025. Staying informed is key to minimizing your tax burden and maximizing opportunities.
Have questions about how these changes apply to your situation? Contact our tax professionals for personalized guidance and planning strategies.
Disclaimer: Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.
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