2025 Inflation Adjustments for Pension Plans, Retirement Accounts Released

Federal Tax

The 2025 cost-of-living adjustments that affect pension plan dollar limitations and other retirement-related provisions have been released by the IRS. The changes have been implemented as the increase in the cost-of-living index, due to inflation, met the statutory thresholds. However, other limitations will remain unchanged.

Highlights of Changes for 2025

1. The contribution limit has increased from $23,000 to $23,500. for employees who take part in:

• -401(k),
• -403(b),
• -most 4 5 7 plans, and
• -the federal government’s Thrift Savings Plan

2. The annual limit on contributions to an IRA remains at $7,000.

Phase-Out Ranges

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. The deduction phases out if the taxpayer or their spouse takes part in a retirement plan at work. The phase out depends on the taxpayer’s filing status and income.

• For single taxpayers covered by a workplace retirement plan, the phase-out range is $79,000 to $89,000, up from between $77,000 and $87,000.
• For joint filers, when the spouse making the contribution takes part in a workplace retirement plan, the phase-out range is $126,000 to $146,000, up from between $123,000 and $143,000.
• For an IRA contributor who is not covered by a workplace retirement plan but their spouse is, the phase out is between $236,000 and $246,000, up from between $230,000 and $240,000.
• For a married individual covered by a workplace plan filing a separate return, the phase-out range remains $0 to $10,000.

The phase-out ranges for Roth IRA contributions are:

-$150,000 to $165,000, for singles and heads of household,

-$236,000 to $246,000, for joint filers, and

-$0 to $10,000 for married separate filers.

The income limit for the Saver’ Credit is:

-$79,000 for joint filers,

-$59,250 for heads of household, and

-$39,500 for singles and married separate filers.