9 New Tax Projections for Retirement Planning in 2025
From: www.thinkadvisor.com
Every year, many numbers in the Internal Revenue Code are adjusted for inflation, ranging from the amount of the standard deduction to key limits for annual contributions to tax-advantaged retirement accounts.
Generally, the IRS sets its formal adjustments in mid-October, but there is now enough inflation data available to make relatively reliable projections for 2025 possible — and that is exactly what Bloomberg Tax has done.
In its latest annual tax projection report, the research and news organization uses data from the consumer price index to project 2025 inflation-adjusted amounts for many key tax rates.
Notably, as Bloomberg Tax warns, there may be instances where a literal application of an IRC provision may result in an amount different from the amount Bloomberg Tax expects the IRS to publish when it releases official inflation-adjusted amounts later in 2024.
Nonetheless, the figures in the report offer an opportunity for financial advisors and their clients to start planning ahead for next year.
See the slideshow for a selection of key tax projections that will be highly relevant for financial advisors working with clients focused on preparing for and navigating retirement.
1. Standard Deduction
For married individuals filing joint returns and for surviving spouses, the standard deduction is projected as $30,000 for 2025, up from $29,200 this year.
For heads of households, the standard deduction is projected as $22,500, up from $21,900 for 2024.
For all other households, the projected figure is $15,000, up from $14,600.
The standard deduction amount for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of $1,350 or the sum of $450 and the individual’s earned income.
2. IRA Contributions
The maximum deductible amount projected is $7,000 for individuals under age 50, the same as the level for 2024.
For individuals age 50 and above, the projected catch-up contribution amount remains $1,000.
3. Saver’s Credit
For tax years beginning in 2025, the adjusted gross income limitations projected for determining the retirement savings contributions credit are as follows:
For married individuals filing joint returns, the adjusted gross income limit for a 50% credit is projected as $47,500. This increases to $51,000 for a 20% credit and $79,500 for a 10% credit.
For heads of households, these projected amounts are $35,625 for the 50% credit, $38,250 for the 20% credit and $59,250 for the 10% credit.
For all other taxpayers, these projected amounts are $23,750, $25,500 and $39,500, respectively.
4. Maximum Capital Gains Rates
For married individuals filing joint returns and surviving spouses, the maximum zero rate amount for 2025 is projected as $96,700, versus $600,050 for the maximum 15% rate amount.
For married individuals filing separate returns, the maximum zero rate amount projection is $48,350, compared with $300,000 for the maximum 15% rate amount.
For heads of households, these projected amounts are $64,750 and $566,700, respectively.
For all other individuals, these projected amounts are $48,350 and $533,400.
For estates and trusts, these projected amounts are $3,250 and $15,900.
As Bloomberg Tax notes, the 20% capital gains tax rate applies to adjusted net capital gain above the maximum 15% rate amounts.
5. Health FSAs
For plan years beginning in 2025, the dollar limitation on voluntary employee salary reductions for contributions to health flexible spending arrangements is projected as $3,300.
If the cafeteria plan permits the carryover of unused amounts, the maximum carryover amount from plan year 2025 (carried into 2026) is $660.
6. Eligible Long-Term Care Premiums
Qualified long-term care premiums, up to the projected amounts shown below, can be deducted as medical expenses:
For taxpayers 40 or younger before the close of the tax year, the projected limitation on eligible long-term care premiums is $480. This increases to $905 for those attaining ages between 40 and 50; to $1,800 for those 50 to 60; to $4,810 for those ages 60 and 70; and to $6,010 for taxpayers 71 and older.
7. HSAs
The annual contribution limitation for health savings accounts are projected as follows.
For self-only coverage for calendar year 2025, the annual limitation on deductions for an individual under a high deductible health plan is $4,300.
For calendar year 2025, the projected annual limitation on deductions for an individual with family coverage under a high deductible health plan is $8,550.
For calendar year 2025, a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,650 for self-only coverage and the annual out-of-pocket expenses do not exceed $8,300 for self-only coverage.
For family coverage, these projected figures are $3,300 and $16,600, respectively.
8. Roth IRA Limits
As Bloomberg Tax explains, for a taxpayer to qualify to contribute to a Roth IRA, the taxpayer’s adjusted gross income must be less than the completed phase-out amount, and the maximum allowable contribution amount is reduced if adjusted gross income exceeds the threshold phase-out amount.
For 2025, the threshold phase-out amount is projected as $236,000 for married individuals filing a joint return, and the completed phase-out amount is $246,000.
These projected figures are $150,000 and $165,000, respectively, for any other taxpayer other than married individuals filing a separate return. For taxpayers in this latter category, the respective figures are $0 and $10,000.
9. Annual Gift Tax Exclusion
Bloomberg Tax projects that the amount of gifts to any person that are not included in the total amount of taxable gifts made during that year will be $19,000, up from $18,000 in 2024.
The amount of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) that are excluded is projected at $190,000.
