Retirement Contributions: Bigger Limits, Bigger Savings

The contribution limits for 401(k), 403(b), and 457 plans are getting a bump, increasing to $23,500. This $1,000 increase from 2024 offers a great opportunity to stash away more for retirement while reducing your taxable income. If you’re over 50, don’t forget about the catch-up contribution, which can add even more to your nest egg.

Pro Tip: If you’re maxing out your 401(k), consider contributing to a Roth IRA for tax-free withdrawals in retirement. The current income eligibility threshold for Roth contributions hasn’t changed much, so check where you stand.

Earned Income Tax Credit (EITC): Helping Families More

Good news for families! The maximum EITC for families with three or more children has been raised to $8,046. This credit can provide a substantial boost for qualifying taxpayers. To claim it, you’ll need to meet income and filing requirements, but if you’re eligible, it’s essentially free money.

Why It Matters: The EITC isn’t just for large families—it can also help smaller households. Use the IRS’s EITC Assistant tool to check your eligibility, especially if your income fluctuates year over year.

Health Savings Accounts (HSAs): Adjustments You Need to Know

HSA eligibility thresholds are changing. In 2025, the minimum deductible for high-deductible health plans (HDHPs) is $2,850, and the out-of-pocket maximum is $4,300. This means you’ll need to budget for slightly higher medical costs before your plan kicks in fully. But HSAs remain one of the best tax-advantaged tools out there.

• Tax-Free Contributions: Reduce your taxable income when you contribute.
• Tax-Free Growth: Invest HSA funds for future healthcare expenses.
• Tax-Free Withdrawals: Pay for qualified medical expenses with no tax hit.

Not using an HSA yet? Pair it with an HDHP to unlock triple tax savings.

Annual Gift Exclusion: Estate Planning Gets a Boost

The annual gift tax exclusion is increasing to $19,000 per person. This means you can give up to $19,000 to as many individuals as you’d like without triggering gift taxes. It’s a fantastic tool for those looking to transfer wealth strategically while avoiding estate taxes.

Pro Tip: Combine this with spousal gift-giving to double the amount to $38,000 per recipient, making it a powerful strategy for reducing your taxable estate.

What This Means for You

The IRS’s updates aren’t just bureaucratic adjustments—they’re opportunities. Use these changes to fine-tune your financial plan. Here’s how to start:

1. Maximize Contributions: Push your retirement and HSA contributions to the limit for the best tax advantages.
2. Review Eligibility: Double-check income limits for credits like the EITC and Roth IRA to ensure you don’t miss out.
3. Plan Your Gifting: Use the increased gift exclusion to transfer wealth efficiently.

Staying proactive with these updates can save you thousands over time. Consult with a financial advisor to tailor these strategies to your specific goals.