Tax Provisions
The following is a list of scheduled limitation adjustments and tax provision changes effective in 2025. We will update this information as additional changes are released. It is essential to be familiar with changes in payroll taxes each year to process payroll accurately.
Compensation Thresholds
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The limitation on the annual benefit under a defined benefit plan increased from $275,000 to $280,000.
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The compensation limit for defined-contribution plans increased from $69,000 to $70,000.
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The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans and the federal government’s Thrift Savings Plan increased from $23,000 to $23,500.
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The annual compensation limit for qualified plans increased to $350,000. The salary threshold used in the definition of a “key employee” in a top-heavy plan increased to $230,000.
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The salary threshold used in the general definition of a highly compensated employee increased to $160,000.
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The applicable dollar amount for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) has increased to $126,000.
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The applicable dollar amount for all other taxpayers who are active participants (other than married taxpayers filing separate returns) increased to $79,000. If an individual or the individual’s spouse is an active participant, the applicable dollar amount for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.
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The applicable dollar amount for a taxpayer who is not an active participant but whose spouse is an active participant has increased to $236,000.
IRA Thresholds
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Traditional IRAs
The deduction for taxpayers making contributions to a traditional IRA is phased out for single individuals and heads of household who are active participants in a qualified plan (or another specified retirement plan) and have adjusted gross incomes between $79,000 and $89,000. For married couples filing jointly, if the spouse who makes the IRA contribution is an active participant, the income phase-out range is between $126,000 and $146,000. For an IRA contributor who is not an active participant and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between $236,000 and $246,000. For a married individual filing a separate return who is an active participant, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
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Adjusted Gross Income Limitation for Roth IRAs
The adjusted gross income limitation for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) increased to $236,000. The adjusted gross income limitation for all other taxpayers (other than married taxpayers filing separate returns) increased to $150,000. The applicable dollar amount for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.
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Adjust Gross Income Phase-Out Range for Roth IRAs
The adjusted gross income phase-out range for taxpayers making contributions to a Roth IRA is $236,000 to $246,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $150,000 to $165,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Retirement Thresholds
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The dollar limitation for employees 50 and older who participate in an employer plan other than a 401(k) or 408(p) SIMPLE remains $7,500.
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The dollar limitation for employees 50 and older who participate in 401(k) or 408(p) SIMPLE remains $3,500.
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The annual compensation limit for eligible participants in certain governmental plans increased to $520,000. The compensation amount regarding simple employee pensions (SEPSs) is $750.
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The annual compensation limit for eligible participants in certain governmental plans increased to $520,000. The compensation amount regarding simple employee pensions (SEPSs) is $750.
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The limitation concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan remains $60,000.
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The definition of a control employee for fringe-benefit valuation purposes increased to $140,000. The compensation amount increased to $285,000.
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The dollar limitation on premiums paid for a qualifying longevity annuity contract remains $210,000.
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The adjusted gross income limitation for determining the retirement savings contributions credit for married taxpayers filing a joint return is $47,500.
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The adjusted gross income limitation for determining the retirement savings contributions credit for taxpayers filing as head of household is $35,625.
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The adjusted gross income limitation for determining the retirement savings contributions credit for all other taxpayers is $23,750.
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The limit on annual contributions to an individual retirement arrangement remains at $7,000.
2025 Tax Provisions
- Standard Deductions: The standard deduction for heads of household is $22,500, $15,000 for singles and married couples filing separate returns, and $30,000 for married couples filing jointly.
- Qualified Transportation Fringe Benefit: The monthly limitation for the qualified transportation fringe benefit and qualified parking increased to $325.
- Health Flexible Spending Cafeteria Plans: The dollar limitation on voluntary employee salary reductions for contributions to health flexible spending arrangements increased to $3,300.
- Medical Savings Accounts: Participants who have self-only coverage must have an annual deductible of at least $2,850 but not more than $4,300.
- Adoption Credit: The adoption tax credit is $17,280.
- Foreign Earned Income Exclusion: The foreign earned income exclusion amount increased to $130,000.
- Personal Exemptions: They will remain at 0, as in the previous tax year. The elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act of 2017.
- Itemized Deductions: The Tax Cuts and Jobs Act of 2017 eliminated the limitation on itemized deductions for this tax year.
Tax Tables
Married Filing Jointly and Surviving Spouses
| Tax Rate | Taxable Income |
|---|---|
| 10% | $23,850 or less |
| 12% | Over $23,850 |
| 22% | Over $96,950 |
| 24% | Over $206,700 |
| 32% | Over $394,600 |
| 35% | Over $501,050 |
| 37% | Over $751,600 |
Head of Household
| Tax Rate | Taxable Income |
|---|---|
| 10% | $17,000 or less |
| 12% | Over $17,000 |
| 22% | Over $64,850 |
| 24% | Over $103,350 |
| 32% | Over $197,300 |
| 35% | Over $250,525 |
| 37% | Over $626,350 |
Single
| Tax Rate | Taxable Income |
|---|---|
| 10% | $11,925 or less |
| 12% | Over $11,925 |
| 22% | Over $48,475 |
| 24% | Over $103,350 |
| 32% | Over $197,300 |
| 35% | Over $250,525 |
| 37% | Over $626,350 |
Married Filing Separately
| Tax Rate | Taxable Income |
|---|---|
| 10% | $11,925 or less |
| 12% | Over $11,925 |
| 22% | Over $48,475 |
| 24% | Over $103,350 |
| 32% | Over $197,300 |
| 35% | Over $250,525 |
| 37% | Over $375,800 |
Standard Deductions
| Tax Filing Status | Amount |
|---|---|
| Married Filing Jointly and Surviving Spouses | $30,000 |
| Head of Household | $22,500 |
| Single or Married Filing Separately | $15,000 |
For more information on standard deductions, see the IRS page about Publication 501, Dependents, Standard Deduction, and Filing Information.
FICA Rate and Wage Bases
- The current Social Security Tax Wage Base for 2025 is $176,100. The FICA contribution rate for Social Security and Medicare taxes is 6.2% and 1.45%, respectively, for a total of 7.65%. There is no wage base for the Medicare (HI) portion of the FICA taxes, and all wages earned are subject to the HI tax; employers and employees are also payees.
- Each pays at a 1.45% rate, although employees pay an additional 0.9% on wages greater than $200,000 for individuals, $250,000 for married couples filing jointly, and $125,000 for married couples filing separately.
- The current cost-of-living adjustment (COLA) for Social Security benefits and SSI payments is 2.5%. Benefits will increase by 2.5% beginning with December 2024 payments.
FUTA Credit Reductions
- California: 0.9%
- Connecticut: 0.9%
- New York: 0.9%
- Virgin Islands: 5.1%
SUTA Wage Base Updates
- Alaska: $51,700
- Colorado: $27,200
- Connecticut: $26,100
- Delaware: $12,500
- Illinois: $13,916
- Iowa: $39,500
- Kentucky: $11.400
- Missouri: $9,500
- Nevada: $41,800
- New Jersey: $43,300
- New York: $12,800
- Oklahoma: $28,200
- Oregon: $54,300
- Utah: $48,900
- Vermont: $14,800
- Washington: $72,800
- West Virginia: $9,500
- Wyoming: $32,400
