Upcoming changes to various tax-advantaged accounts can help you save more money — if you know the rules. Whether you’re an employee or have a small business, the following seven adjustments will allow you to improve your current and future finances and save more money in 2025.
1. Workplace retirement accounts have higher contribution limits
Most workplace retirement plans, such as 401(k)s and 403(b)s, allow participating employees to contribute up to $23,000 in 2024. Starting in 2025, you can contribute $23,500.
There is an additional catch-up contribution limit for those over 50, which is $7,500 for 2024. It remains the same for 2025, giving you a total limit of $31,000. However, there is an exception for some older plan participants that I’ll cover next.
If your employer contributes matching or profit-sharing funds to your retirement plan, you and your employer’s total contributions can be up to $69,000 in 2024. That limit increases to $70,000 in 2025. For those over 50, your total contribution limit, including catch-ups, will be $77,500 ($70,000 plus $7,500) in 2025.
Traditional retirement plans allow nondeductible contributions and require taxable withdrawals. Roth plan contributions are taxable but give you tax-free withdrawals in retirement. Distributions from either account before age 59.5 that weren’t previously taxed are subject to income taxes plus an additional 10% early withdrawal penalty.
2. Workplace retirement plans have higher catch-up contribution limits
If you participate in a workplace retirement plan, you qualify for even higher catch-up contributions, known as a “super catch-up,” in any year you turn 60 to 63.
You can contribute the greater of $10,000 or 150% of the regular catch-up amount ($7,500 for most plans in 2025), which will be $11,250 for participants in that age range starting next year.
3. Health savings accounts (HSAs) have higher contribution limits
If you purchase an HSA-qualified health plan through an employer or on your own, you’re eligible to fund an HSA. Your contributions are tax-deductible, and your investment earnings are never taxed if you spend them on qualified healthcare expenses.
If you’re single with an individual HSA-qualified health plan, your HSA contribution limit increases from $4,150 in 2024 to $4,300 in 2025. If you have a family plan, your limit increases from $8,300 to $8,550.
Plus, if you’re over 55, you can contribute an additional $1,000 catch-up, which remains unchanged in 2025.
4. Flexible spending accounts (FSAs) have higher contribution limits
Unlike an HSA, an FSA can only be offered by employers. It allows you to defer a portion of your pre-tax paycheck to the account to spend on qualified healthcare and childcare expenses by an annual deadline. For 2024, FSA contribution limits are $3,200 and will increase to $3,300 in 2025.
5. Roth IRA income limits increase
Anyone with earned income, no matter your age, qualifies for a traditional or Roth IRA. The IRA contribution limits are $7,000 for 2024 and 2025. If you’re over 50, you qualify for an additional $1,000 catch-up, giving you a total contribution of $8,000 in 2024 or 2025.
However, there are Roth IRA income limits, which increase next year as follows:
- Single taxpayers with modified adjusted gross income (MAGI) above $161,000 in 2024 are not eligible for a Roth IRA. For 2025, the income threshold is MAGI over $165,000.
- Married taxpayers filing jointly with MAGI above $240,000 are not eligible for a Roth IRA in 2024. That amount increases to $246,000 in 2025.
6. Solo 401(k)s have higher contribution limits
A solo 401(k) is a retirement plan for the self-employed without full-time employees, except a spouse. You can make contributions as both an employee and owner of your business, up to 100% of your compensation.
For 2024, you can make solo 401(k) contributions up to $23,000 as an employee. Plus, you can contribute up to 25% of compensation as your employer, up to $69,000. If you’re over 50, you can contribute an additional catch-up of $7,500 for a total of $76,500.
The 2025 aggregate contribution limit will be up to $70,000 if you’re under 50 and $77,500 if you’re over 50. However, those between 60 and 63 can contribute up to $81,250 ($70,000 plus $11,250).
READ ALSO: Building a Side Business? 5 Tips for More Success
7. SEP-IRAs have higher contribution limits
A SEP-IRA, or Simplified Employee Pension IRA, is a retirement plan for the self-employed with or without employees. Contributions can only come from an employer; employees can never contribute their own funds.
For 2024, contributions are limited to the lesser of 25% of compensation or $69,000. But the limit increases to the lesser of 25% of compensation or $70,000 for 2025. SEP-IRAs don’t offer additional catch-up contributions.
