As we begin the new year, there’s no better time to take control of your financial future. Last year, we provided a financial checklist to kick off the new year, so we encourage you to revisit this list both now and regularly throughout the year to ensure you’re staying on track.
A new year also brings new contribution limits for some savings vehicles, so this month, we are providing a quick reference list for tax-advantaged ways to save in 2025:
401(k), 403(b), and Most 457 Plans
The annual employee contribution limit for employees who participate in these plans is now $23,500, up from $23,000 in 2024 (catch up contributions apply for those 50 and older.) The combined employee and employer contribution has increased to $70,000 from $69,000 last year.
If your company offers a Roth 401(k), consider contributing to this as well, as both options have unique advantages, and your choice depends on your current financial situation and long-term goals. Understand, however, that the contribution limits stated above are combined limits for 401(k)/Roth 401(k) contributions.
If your employer matches 401(k) contributions, try to contribute at least enough to get the full match – it’s free money!
Traditional IRA and Roth IRA
The annual contribution for these retirement vehicles has remained at $7,000 per year ($1,000 catch-up contribution for ages 50+). Note that Roth eligibility is dependent on income: you are eligible if you have a 2025 Modified Adjusted Gross Income (MAGI) below $165,000 for a single tax filer or $246,000 if filing jointly.
The key thing to understand is that the $7,000 limit for 2025 is a combined limit between Traditional and Roth IRAs – it’s not $7,000 for each type. This means you can contribute up to $7,000 total across both types of accounts, and you can split it any way you want between Traditional and Roth (if eligible).
Evaluate which IRA type best suits your situation. Roth IRAs can be particularly advantageous early in your career when you’re typically in a lower tax bracket. If your MAGI exceeds the Roth IRA income limits, you may still have opportunities to fund a Roth IRA through conversion strategies – your financial or tax advisor can help you explore these options.
Health Savings Accounts (HSAs)
You are eligible to contribute to an HSA if you have a high-deductible insurance plan. For 2025, this is defined a health plan having an annual deductible of $1,650 for self-only coverage, or $3,300 for family coverage.
If you qualify to contribute to an HSA, note that HSA contribution limits have seen increases for 2025: $4,300 per year for individual coverage (up from $4,150) and $8,550 per year for family coverage (up from $8,300). Those 55 and older can contribute an additional $1,000 as a catch-up contribution.
Remember the triple tax benefit of HSAs – contributions are tax deductible, the assets grow tax deferred, and withdrawals are tax free if used for qualified medical expenses.
Healthcare Flexible Spending Accounts (FSAs)
The 2025 FSA contribution limit has increased to $3,300 for healthcare FSAs, an increase of $100 per year. Couples may contribute up to $6,600 per year if both spouses have access to an FSA through their employer.
While FSAs can be used for big ticket items such as dental work, other common expenses such as sunscreen, cold medicine and vitamins are also FSA-eligible, but remember that most plans require that funds are used during the calendar year and can’t be carried over.
Commuter Costs
Do you spend money commuting to or parking at work? Your company may offer reimbursement or a pre-tax savings option. In 2025, the IRS increased the limits for commuter benefits to $325 per month for transit and $325 per month for parking. Both were previously capped at $315/month.
For employees, this benefit limit increase means converting commuting expenses into savings on taxes!
Start planning early to make the most of these tax-advantaged savings opportunities in 2025. Take a few minutes today to review your current contribution levels and consider whether you can increase them to take advantage of these higher limits!