3 Tax-Planning Numbers All Employees Should Know In 2025

January is a good time to consider tax planning for your income in 2025. It’s before tax-return season puts your focus on last year’s income. It also comes before the likely bustle over tax legislation by the new Republican White House and Congress: they must decide whether to extend the current tax code, introduced in 2018 by the Tax Cuts & Jobs Act, which expires after 2025.

In this calm before those storms, take a moment to understand the federal tax-related numbers for 2025 that are crucial for you.

Where to begin? The IRS and the Social Security Administration annually adjust for inflation a myriad of key numbers in federal tax-law provisions. Amid this onslaught of tax figures, it can be difficult to spot the adjustments that matter to you. Some apply only to very high-net-worth executives and other super-wealthy people, such as the federal estate-tax exemption (in 2025, $13.99 million for unmarried taxpayers and $27.98 million for married taxpayers). The more obscure adjustments are chiefly of interest only to administrators of corporate benefit plans and other experts (like me) who keep track of this stuff. For example, the income definition of “highly compensated employee,” which affects eligibility for employee stock purchase plans (ESPPs) and 401(k) plan non-discrimination testing, is $160,000 in 2025.

So let’s cut through the clutter and focus on the essential points. Below are three sets of tax figures in 2025 that all employees should know. They relate to compensation from work: paycheck withholding, the potential need for estimated taxes, and your retirement savings.

1. The Social Security Wage Base

The Social Security tax (at a rate of 6.2%) applies to wages up to a maximum amount per year that is set annually by the Social Security Administration. Compensation income above that threshold is not subject to the Social Security tax. (By contrast, the Medicare tax is uncapped, with a rate of either 1.45% or 2.35%, depending on your income level.)

The Social Security wage cap is $176,100 in 2025, up from $168,600 in 2024. This means the maximum possible Social Security withholding in 2025 is $10,918.20. Once your income is over the wage cap and you’ve maxed out the withholding, you’ll see 6.2% more in your paycheck.

2. Your Income-Tax Bracket And Withholding

If you’re an employee, your company withholds taxes from your paycheck according to the information on your Form W-4. The IRS recommends that you consider completing a new Form W-4 whenever your financial, personal, or job situation changes.

The table below shows the federal income-tax brackets and their rates. It can help you understand how an additional amount of compensation would be taxed at your marginal tax rate: the percent of tax you pay for an additional dollar of income in your current tax bracket. That number tells you whether the withholding as indicated on your W-4 will cover the total tax you will owe for 2025. To avoid penalizing additional income in your mind, be sure you know your effective or average tax rate.

Need To Pay Estimated Taxes?

Additional compensation received, such as a cash bonus or income from a nonqualified stock option exercise or vesting of restricted stock units, is considered supplemental wage income. For federal income-tax withholding, most companies do not use your W-4 rate for that income. Instead, they apply the IRS flat rate of 22% for supplemental income (the flat rate is 37% for yearly supplemental income in excess of $1 million).

As shown by the table above, once you know your marginal tax-bracket rate, you may find the withholding rate of 22% does not cover all of the taxes that you will owe on supplemental wage income. In that case, you must either put extra money aside for the 2025 tax return you will file in 2026, pay estimated taxes during 2025, or adjust your W-4 for your salary withholding as soon as possible to cover the shortfall. Speak with a qualified tax professional, such as a CPA or Enrolled Agent, when you’re uncertain about the best approach to take.

If estimated taxes are the route you choose, know that due dates for quarterly estimated tax payments in the 2025 tax year are April 15, June 16, and September 15 of 2025 and January 15 of 2026. (The IRS routinely postpones these due dates for taxpayers in areas of the United States affected by natural disasters. See the IRS website section Tax Relief In Disaster Situations.)

3. Your Contribution Limit For Qualified Retirement Plans

In 2025, you can elect to defer up to $23,500 from your paychecks into qualified retirement plans, such as your 401(k) (or your 403(b) if you work for a nonprofit, school, or government agency). That annual limit rose from $23,000 in 2024.

The total ceiling for deferrals to defined contribution retirement plans, including any extra part contributed by your employer, rose to $70,000 in 2025, a $1,000 increase over last year’s amount. If you are 50 or older, you can contribute an additional $7,500 per year.

The amount of compensation income that can be considered in the calculation for qualified deferrals grew to $350,000 in 2025. Check with your company’s 401(k) plan administrator for the process of making changes in your compensation deferral election.

Want To Defer More Income?

Look into whether your company has a nonqualified deferred compensation plan, sometimes called an excess 401(k) plan. For more on these plans, see the website myNQDC.com.

Inflation Adjustments For Health Savings Accounts

While not all employees have them, health savings accounts (HSAs) are also getting an increase in their pre-tax contribution limits for 2025 in response to inflation. HSAs are available only for high-deductible health plans.

The IRS has raised the yearly contribution limit for HSAs. For self-only coverage it is $4,300 in 2025, up by $150 from last year. For family coverage it is $8,550 in 2025, up from $8,300 in 2024. The limit for HSA catchup contributions, available for people 55 or older, remains $1,000. With more companies setting up pre-tax payroll deductions for HSAs and matching employee contributions, these increases could be significant for many people as the cost of health care continues its relentless rise.

IRS Resources

Here are resources with more details on the many adjusted 2025 tax numbers: