Here they are, the numbers you need from the IRS to plan ahead for next year. Remember that the below applies to money you earn starting January 1, 2025, so don’t make any changes just yet. See this post for the numbers affecting 2024. Some important highlights:
Standard deduction
increases to $15,000 if your filing status is single or married-filing-separately
increases to $22,500 if your filing status is head of household
increases to $30,000 if your filing status is married-filing-jointly
Review this post for an explainer on the filing statuses and which to use.
Tax brackets
the number of brackets remains the same at 7
the limits of each bracket increases by about 2.8%: see here for specifics on the brackets
401k/403b/457/Thrift Savings Plan contribution limits
the employee contribution limit increases to $23,500
the catchup contribution limit (which is available to you beginning the year you turn 50) remains $7,500 but......
IMPORTANT CHANGE AND NEW PLANNING OPPORTUNITY FOR 2025!: starting next year, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in these plans For 2025, this higher catch-up contribution limit is $11,250.
the overall plan limit (employee + employer + catchup + aftertax) increases to $70,000. This is the number those contributing to SEP or Solo 401k plans should keep in mind as well
IRA contribution limits
the IRA and Roth contribution limit remains $7,000, and the catchup contribution remains $1,000.
the income limits that relate to making or deducting these contributions will change (see here for details), so familiarize yourself with those limits, or ask your advisor, before making a contribution in 2025
Estate and gift tax exemption
the estate tax exemption increases to $13.99 million per individual - so a married couple can leave an estate of $27.98 million free of federal estate taxes. States might have a different idea, of course.
the annual gift tax exclusion will increase to $19,000. This means you can give $19,000 to as many people each year as you like without it having an impact on your eventual estate tax. If you are married, you and your spouse can each give $19,000. And remember, a gift is never taxable to the recipient.
Social Security
cost-of-living adjustment (COLA) for those currently receiving benefits: 2.5%
the earnings limit increases to $176,100. This is the maximum amount of annual income that is subject to the Social Security tax. If you expect your gross income to be at least that much next year, remember to factor in the increased take-home once you reach that limit, and be proactive about giving those dollars a job. Also keep in mind that the limit is applied to each person individually: marital status, deductions, and/or your spouse’s income don’t matter.
While not too much is changing next year, 2026 brings the possibility of big shifts as many of the provisions of the 2017 tax laws are due to expire. Some may be extended beyond that, and of course this is heavily dependent on the outcome of next week's elections, both for the White House and Congress. But keep your eye on what comes out of Washington in the next year.
You can use the above information, as well as any expected changes to your situation (expected job change? change in marital status?) to consider any moves you might want to make in January for the rest of the year.
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