Tax Updates for 2025: What You Should Know! 

As we step into 2025, several key tax changes are poised to impact individuals and businesses alike. From increases in retirement contribution limits to adjustments in Social Security benefits and tax brackets, here is a comprehensive overview of the updates to help you plan ahead. 

Increased Contribution Limits for Retirement Accounts 

One of the standout updates for 2025 is the increase in contribution limits for retirement savings plans: 

• 401(k), 403(b), and Similar Plans: The maximum employee contribution limit has risen to $23,500, up from $23,000 in 2024.  

• For those aged 50 and older, the catch-up contribution limit remains $7,500, allowing a total potential contribution of $31,000. 
• A special new catch-up contribution rule applies for participants aged 60 to 63. For 2025, these individuals can contribute an additional $11,250, bringing their total possible contribution to $34,750. This limit will be indexed for inflation in subsequent years. 

• IRAs: The contribution limit for Individual Retirement Accounts (IRAs) remains $7,000, with an additional catch-up contribution of $1,000, also unchanged, for those aged 50 and older, bringing the total to $8,000. 

• Cash Balance Retirement Plans and other Defined Benefit Plans: Employers sponsoring cash balance plans or other defined benefit plans may be able to make higher contributions in 2025. Effective, January 1, 2025, under Internal Revenue Code (I.R.C.) 415(b)(1)(A), the limitation on the annual benefit under a defined benefit plan increases to $280,000. Cash Balance plans are an attractive option for higher-income earners looking to accelerate their retirement savings. These plans are offered by employers.

These adjustments reflect cost-of-living changes and are designed to encourage greater retirement savings. 

Social Security Benefits See a Boost 

Social Security recipients will notice a significant increase in their benefits in 2025, thanks to an estimated 2.5% Cost-of-Living Adjustment (COLA).  

In addition, the Social Security taxable wage base has been raised to $176,100, up from $168,600 in 2024. This means higher earners will see more of their income subject to Social Security taxes. 

Changes to Tax Brackets and Standard Deductions

The IRS has adjusted tax brackets and standard deductions for 2025 to account for inflation.  

Here are the revised brackets for individual filers: 



• 10%: Up to $11,925 individual (up from $11,600) 
• 12%: $11,925 to $48,475 (up from $11,600 to $47,150) 
• 22%: $48,475 to $103,350 (up from $47,150 to $100,525) 
• 24%: $103,350 to $197,300 (up from $100,525 to $191,150) 
• 32%: $197,300 to $250,525 (up from $191,150 to $243,725) 
• 35%: $250,525 to $626,350 (up from $243,725 to $609,350) 
• 37%: Over $626,350 (up from $609,350) 

Here are the revised brackets for married couples filing jointly: 

• 10%: Up to $23,850 (up from $23,200) 
• 12%: $23,850 to $96,950 (up from $23,200 to $94,300) 
• 22%: $96,950 to $206,700 (up from $94,300 to $201,050) 
• 24%: $206,700 to $394,600 (up from $201,050 to $383,900) 
• 32%: $394,600 to $501,050 (up from $383,900 to $487,450) 
• 35%: $501,050 to $751,600 (up from $487,450 to $731,200) 
• 37%: Over $751,600 (up from $731,200) 

The standard deduction has also increased: 

• Single Filers: $15,000 (up from $14,600) 
• Married filing jointly: $30,000 (up from $29,200) 

Health Savings Accounts (HSAs) Get a Boost 

HSA contribution limits have increased as well: 

• Self-only coverage: $4,300 (up from $4,150) 
• Family coverage: $8,550 (up from $8,300) 
• Catch-up contribution (age 55 and older): $1,000 (unchanged) 

Key Takeaways 

These tax updates reflect the government’s efforts to adjust for inflation and provide greater opportunities for savings and financial planning. To make the most of these changes, consider: 

1. Maximizing Retirement Contributions: Take advantage of higher limits to bolster your retirement savings. 
2. Reviewing Withholdings and Tax Strategies: Ensure your withholdings align with the new tax brackets to avoid surprises at tax time. 
3. Exploring Tax Credits: Check your eligibility for expanded credits to reduce your tax liability. 
4. Planning for Social Security Changes: Higher taxable wage bases and benefits may affect your financial strategy. 

Stay informed and consult with a tax professional to optimize your financial decisions for 2025. By understanding these updates, you can better navigate the evolving tax landscape and secure a stronger financial future. 

What’s Next? 

PlumTree Financial is committed to helping you navigate the political and tax environment. The 2024 election represents a shift in power that could result in tax, spending and trade policies, to name a few. 

Potential changes could include reducing corporate tax rates to attract businesses, extending or making permanent provisions from the 2017 Tax Cuts and Jobs Act. These provisions could include the lowered individual tax brackets and the increased standard deduction. Additionally, proposals to repeal or reduce estate taxes and adjust capital gains tax rates are likely to surface. Republicans may also push for limits on certain tax credits and deductions to streamline the tax code. While these changes aim to reduce tax burdens, their implementation will depend on bipartisan negotiations and fiscal considerations.

PlumTree Financial stands ready to discuss how potential changes could impact you and we have adopted additional tools to help communicate risks and potential in your portfolio. We look forward to discussing this with clients this year.