Written by: Lauren Ferraro, CFP ®, CPC, CPFA, AIF®, Senior Wealth Manager
On November 1, the IRS announced the contribution limits for 2025, and unless it is extended, the Tax Cuts and Jobs Act is set to sunset at the end of 2025. With this information, the text below pertains to IRA and 401(k) contribution limits, as well as qualified charitable distributions and gifting limits.
The limit on IRA contributions remains the same at $7,000 or$8,000 for those who are 50 and older. For those that are still working and participating in an employer sponsored retirement plan including 401(k), 403(b) and 457 plans, the limit that participants can contribute increased to $23,500 (up from $23,000). The catch-up limit for employees aged 50 and over remains at $7,500 for 2025. Therefore, participants in 401(k), 403(b) and 457 plans who are age 50 or over can contribute up to $31,000 starting in 2025.
The deductible limit for charitable distributions in 2025 has also increased and is now $108,000 (up from $105,000 in 2024). If you are 70.5 years or older, you can make a qualified charitable donation (QCD) to a qualified 501 c (3) organization directly from your IRA. This may be particularly beneficial for those at Required Minimum Distribution (RMD) age who are charitably inclined and want to donate which counts towards satisfying their RMD with the benefit of excluding the donation from taxable income.
As the year end nears, this is a good time to consider the benefits of gifting. Gifting allows you to pass assets to beneficiaries in a tax efficient manner. Giving assets to your loved ones while you are alive has many benefits. Gifting allows your beneficiaries to benefit from the gifts now and allows the opportunity to see your gifts being enjoyed while you and the beneficiary are both living.
Under the Federal Unified Estate and Gift Tax, an individual can gift up to $19,000 for 2025 (up from $18,000 in 2024) to a recipient without estate or gift tax consequences or filing requirements (unless spouses are splitting a gift in which case, they must file Form 709). Married couples can jointly gift up to $38,000 for 2025 to each recipient. The recipient generally does not owe taxes or report the gift if it does not go beyond the limits above. There are several different ways to gift including cash gifts, gifts to 529 plans for educational expenses, or direct donations to educational institutions. It is important to note that gifts for the year should be made December 31st.
We hope you are enjoying the holiday season and wish you a wonderful 2025! Please reach out to our team if you have any questions about this information or the details of your specific retirement plan.
Ready to Take The Next Step?
For more information about any of the products and services listed here, schedule a meeting today or register to attend a seminar.