IRS Announces New Contribution Limits for 2025: What You Need to Know

As we move into 2025, it’s important to stay updated on the latest IRS contribution limits for your financial and health accounts. Whether you’re saving for retirement, planning for healthcare expenses, or managing commuter costs, the IRS adjusts these limits annually to reflect inflation and economic changes. Understanding these updates will help you maximize your savings and take full advantage of tax-advantaged accounts.

Below is a breakdown of the new 2025 contribution limits for retirement plans, Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and commuter benefits.

1. Retirement Accounts

• 401(k), 403(b), and 457 Plans: The 2025 contribution limit rises to $23,500 (an increase from $23,000 in 2024).
  • Catch-Up Contributions for those aged 50 and older remain at $7,500, bringing the total potential contribution to $31,000. However, employees aged 60 to 63 can benefit from a higher catch-up contribution of $11,250, increasing their total contribution limit to $34,750.
• Traditional and Roth IRAs: The contribution limit increases to $7,000 for individuals under 50.
  • Catch-Up Contribution for those 50+ stays at $1,000, allowing for a total of $8,000.
• SIMPLE IRAs: The contribution limit rises to $16,500 (up from $16,000 in 2024). The catch-up for workers over 50 increases to $3,500, for a total of $20,000​
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2. Health Savings Accounts (HSAs)

• HSAs are tax-advantaged accounts for individuals with high-deductible health plans (HDHPs).
  • Individual Coverage: The contribution limit increases to $4,300 (up from $4,150 in 2024).
  • Family Coverage: The limit rises to $8,650 (up from $8,300 in 2024).
  • Catch-Up Contribution: Those 55 and older can contribute an additional $1,000​
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3. Flexible Spending Accounts (FSAs)

• Health FSAs: The annual contribution limit increases to $3,300 (up from $3,200 in 2024).
  • The carryover limit for unused funds rises to $660. This allows participants to roll over unused amounts into the next plan year​
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    .
• Dependent Care FSAs: The contribution limit remains unchanged at $5,000 per household ($2,500 for married filing separately).

4. Commuter Benefits

• Transportation and Parking Benefits: Limits for pre-tax commuter benefits (like public transit and parking) increase to $320 per month (up from $300 in 2024)​
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Planning Ahead for 2025

To make the most of these new limits:

1. Adjust your contributions early to align with these updates.
2. Maximize catch-up contributions if you’re over 50 for retirement savings.
3. Plan FSA and HSA contributions to optimize tax savings while covering anticipated expenses.
4. Take advantage of pre-tax commuter benefits to save on transportation and parking costs.

These changes offer an opportunity to boost savings while reducing taxable income. Stay updated with your plan administrator or financial advisor to align your contributions with IRS limits.

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