
2025 Tax and Retirement Changes: What You Need to Know
As 2025 gets underway, there are several key changes in tax and retirement regulations to know. Here’s an overview of the most interesting.
Retirement Contributions
The contribution limits for qualified retirement plans, including 401(k)s and 403(b)s, have increased by $500, bringing the new limit to $23,500. Individuals aged 50 or older can contribute an additional $7,500, or a total of $31,000.
IRA Contributions
The contribution limits for IRAs remain unchanged at $7,000, or $8,000 for those aged 50 and older.
RMD Age
The age at which individuals must begin taking Required Minimum Distributions (RMDs) from qualified retirement accounts like traditional IRAs and 401(k)s is currently 73. However, the beginning age increases to 75 for individuals born in 1960 or later.
Estates and Gifts
The annual exclusion for gifts has increased to $19,000 per donor per recipient. Additionally, individuals interested in “superfunding” a 529 plan can give up to $95,000 in one year (five years of gifts) without triggering gift tax.
The federal lifetime gift and estate tax exemption has increased to $13.99 million per person, or $27.98 million for married couples, up from the previous year’s $13.61 million.
Rollover of 529 Funds to Roth IRAs
Account holders can now roll over up to $35,000 of unused 529 plan balances to a Roth IRA, provided the account has been active for at least 15 years. The rollover is subject to annual IRA contribution limits, and the beneficiary must have earned income equal to or greater than the rollover amount.
SECURE 2.0 Changes
Mandatory Auto-Enrollment in 401(k) Plans
Starting in 2025, most new 401(k) and 403(b) plans will be required to automatically enroll participants with a default contribution rate of at least 3%. Employees will still have the option to opt-out or adjust their contribution rate.
‘Super’ Catch-Up Contributions
SECURE 2.0 allows for larger catch-up contributions for individuals aged 60 through 63. For 2025, this catch-up contribution limit is $11,250 instead of the standard $7,500 limit, which now applies to those 50 – 59 and over 64.
Long-Term Part-Time Employees Gain Access to Retirement Plans
In 2025, businesses will be required to allow long-term part-time employees—those who work at least 500 hours per year for two consecutive years—to participate in employer-sponsored retirement plans. Small businesses with non-traditional employment structures will most likely be affected by this rule change.
Reminder: RMDs for Employer-Sponsored Roth Accounts
As of last year, designated Roth accounts in 401(k) or 403(b) plans are no longer subject to RMD rules while the account holder is alive, aligning them with the rules for Roth IRAs.
Delayed: Roth Catch-Up Contribution Requirement
The requirement for individuals earning over $145,000 in FICA wages to make catch-up contributions to Roth accounts was delayed until 2026.
Whitney Butler