401(k) Tax Benefits 2025 — Contribution Limits & Tax Savings
2025 IRS data — updated for current tax year
2025 401(k) Contribution Limits
The IRS increased the 401(k) contribution limit for 2025.
| Contribution Type | 2025 Limit | 2024 Limit |
|---|---|---|
| Employee contribution (under 50) | $23,500 | $23,000 |
| Catch-up contribution (50–59, 64+) | +$7,500 | +$7,500 |
| Catch-up contribution (60–63) | +$11,250 | +$7,500 |
| Total (employer + employee) | $70,000 | $69,000 |
Tax Savings by Bracket
Traditional 401(k) contributions reduce your taxable income. A $23,500 contribution saves different amounts depending on your marginal rate.
| Tax Bracket | Federal Tax Saved on $23,500 |
|---|---|
| 22% | $5,170 |
| 24% | $5,640 |
| 32% | $7,520 |
| 35% | $8,225 |
| 37% | $8,695 |
Frequently Asked Questions
Should I choose Traditional or Roth 401(k)?
If you expect to be in a higher tax bracket in retirement than now, Roth is better — pay tax now at a lower rate. If you're in a high bracket now and expect lower income in retirement, Traditional saves more.
What happens if I contribute too much to my 401(k)?
Excess contributions are taxed twice — once when contributed and again when withdrawn. Remove excess contributions (plus earnings) before April 15 to avoid the double tax.