Accounting
IRS increases 401(k) limit for 2025
The Internal Revenue Service said Friday that the amount individuals can contribute to their 401(k) plans in 2025 has increased by $500 to $23,500, up from $23,000 for 2024, as part of its annual cost-of-living adjustments, although the limit for individual retirement accounts remains $7,000.
The IRS issued technical guidance Friday on various cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2025 in
The annual contribution limit for employees who participate in 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan has increased to $23,500, up from $23,000.
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The limit on annual contributions to an IRA remains $7,000. The IRA catch‑up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (also known as SECURE 2.0) to include an annual cost‑of‑living adjustment but remains $1,000 for 2025.
The catch-up contribution limit that generally applies for employees aged 50 and over who participate in most 401(k), 403(b), governmental 457 plans and the federal government’s Thrift Savings Plan remains $7,500 for 2025. That means participants in most 401(k), 403(b), governmental 457 plans and the federal government’s Thrift Savings Plan who are 50 and older generally can contribute up to $31,000 each year, starting in 2025. Under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in these plans. For 2025, this higher catch-up contribution limit is $11,250 instead of $7,500.
The income ranges for determining eligibility to make deductible contributions to traditional individual retirement arrangements, to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2025.
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it’s eliminated, depending on the filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase‑out ranges for 2025:
- For single taxpayers covered by a workplace retirement plan, the phase-out range has grown to between $79,000 and $89,000, up from between $77,000 and $87,000.
- For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increasing to between $126,000 and $146,000, up from between $123,000 and $143,000.
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increasing to between $236,000 and $246,000, up from between $230,000 and $240,000.
- For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
- The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $150,000 and $165,000 for singles and heads of household, up from between $146,000 and $161,000. For married couples filing jointly, the income phase-out range is increased to between $236,000 and $246,000, up from between $230,000 and $240,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
- The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $79,000 for married couples filing jointly, up from $76,500; $59,250 for heads of household, up from $57,375; and $39,500 for singles and married individuals filing separately, up from $38,250.
- The amount individuals can generally contribute to their SIMPLE retirement accounts is increased to $16,500, up from $16,000. Pursuant to a change made in SECURE 2.0, individuals can contribute a higher amount to certain applicable SIMPLE retirement accounts. For 2025, this higher amount remains $17,600.
- The catch-up contribution limit that generally applies for employees aged 50 and over who participate in most SIMPLE plans remains $3,500 for 2025. Under a change made in SECURE 2.0, a different catch-up limit applies for employees aged 50 and over who participate in certain applicable SIMPLE plans. For 2025, this limit remains $3,850. Under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in SIMPLE plans. For 2025, this higher catch-up contribution limit is $5,250.
Accounting’s AI revolution not only continued into 2024 but actually seemed to accelerate, as it has now become near impossible to go to a conference, sit in a strategy meeting or even shop for new software without hearing those two famous letters, often preceded by the word “generative” and followed by the word “powered” or “driven.” This might seem rather strange, as around this time last year we were marveling at how far AI had come in such a short time, and yet at the end of 2024 we find ourselves in this place once more as the current generation of AI tools makes last year’s seem almost quaint.
This is why, in our second annual AI Thought Leaders Survey, we asked experts in the field what they thought of the past year. The field of AI is both vast and ever-changing, and we wanted to see what people deeply enmeshed in AI in accounting thought of all the changes they’ve seen this year.
Many noted that AI has gone from being a novelty or an experimental tool in many cases to being a practical, widely-adopted technology integral to daily operations. In this respect, even those who may not consider themselves tech-savvy are now using sophisticated AI tools that would have seemed like science fiction as little as ten years ago. Strategic decision-making, advanced analytics, and personalized client interactions are just the tip of the iceberg when it comes to use cases for accountants.
“At the beginning of the year, AI in accounting felt like an emerging trend that many were watching from the sidelines,” said Kacee Johnson, vice president of strategy and innovation at CPA.com, talking about the noticeable shift since then. “It’s no longer just about automation; the conversations have evolved to exploring how AI can enhance advisory roles, improve decision-making, and solve capacity challenges. I’ve seen more professionals embracing AI as a tool they need to understand and leverage, not just something that might affect their work down the line.”
The speed at which AI has advanced this year impressed many, especially its generative capabilities and its application to data both structured and unstructured. In a short time it has transformed workflows, increased productivity, and uncovered new insights their human users had never considered. Meanwhile, the recent rollout of specialized AI agents capable of limited autonomy to handle complex tasks like fraud detection, tax analysis and data reconciliation tells them there’s still so much more to come.
“We have all seen AI advance significantly in the past year, especially in the area of automation of manual tasks. Think about areas like bill pay, invoicing, expense management, financial statement analysis, etc. AI is putting accountants into more strategic roles and getting them out of the trenches in doing the manual tasks. This past year I have seen a number of players in the tax space surface by leveraging AI. Although many of them still continue to be a work in progress, we are going to see AI totally change the tax space and eliminate the massive tech stacks that exist in many firms today,” said Jim Bourke, managing director of Withum’s advisory services.
Of course, all technologies have their risks and AI is no exception. Indeed, as the technology’s presence in firms grows, so too have the concerns about its use. Our experts cited security risks like data breaches and misuse of sensitive information by AI systems, and many were still worried about the accuracy of their outputs given the tendency to “hallucinate” (i.e. making stuff up). But they also raised broader ethical concerns, such as the perpetuation of bias as well as potential job displacement in the short term. Our experts didn’t think AI was going to wholesale replace accountants anytime soon, but some conceded that it would serve to disrupt job dynamics in certain parts of the profession.
“It’s poised to replace certain jobs or at least automate specific tasks within jobs. AI agents will influence particular roles, potentially altering the premium placed on certain skills, leading to some traditional jobs disappearing entirely,” said Prashant Ganti, head of product management in Zoho’s Finance and Operations business unit.
In this, the first of three parts, we look at what our experts—drawn from CPA firms, software vendors and academics all deeply involved in the field of artificial intelligence in the accounting world—thought of three questions:
* How has your perception or impression of AI in accounting changed from the beginning of this year to now?
* What scares you the most about AI today? What is your biggest concern?
* What’s impressed you the most about AI this year? What really got your attention? Both in terms of accounting and overall.
We’ll have more from our experts next week.
Technological competency and outdated provisions are two areas refreshed by
The proposed regulations, if finalized, would amend Circ. 230 “to account for changes in the law and the evolving nature of tax practice.” Among other changes, the proposed regs would remove or update the parts of Circ. 230 related to registered tax preparers and return preparation, as well as contingent fees to reflect changes in the law since the prior amendments to Circ. 230 in 2011 and 2014. The proposed regulations would also revise or eliminate other provisions that are out of date.
The regulations would affect registered tax return preparers, CPAs, Enrolled Agents, enrolled retirement plan agents, enrolled actuaries, Annual Filing Season Program participants, attorneys, appraisers and other practitioners. These regulations propose to:
- Eliminate provisions related to registered tax preparers;
- Classify the use of certain contingent fee arrangements by practitioners as disreputable conduct;
- Establish new standards for appraisals and the disqualification of appraisers;
- Provide rules related to appraisers, including the standards for disqualification; and,
- Update certain provisions.
Additionally, the proposed regulations would incorporate new provisions that require practitioners to maintain technological competency and would clarify some provisions, such as confirming that the IRS Office of Professional Responsibility retains jurisdiction over practitioners who have been suspended or disbarred from practice.
The proposed regs are slated for publication in the Federal Register on Dec. 26.
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