Tax Clarity Newsletter
By Douglas E. Price
November 19, 2025
💌 Today’s Thing: The Annual Adjustments on Retirement Contribution Amounts — What are the Numbers for 2026?
On this past Thursday, the Treasury Department issued Notice 2025-671 to clarify limitations defined in Internal Revenue Code (IRC) §415 for benefits and contributions under qualified retirement plans. The tax law requires annual adjustments for cost-of-living increases, particularly relevant in the current period of rising consumer prices. The most notable changes cited in the Notice:
- The amount individuals can contribute to their 401(k) plans in 2026 has increased to $24,500, up from $23,500 for 2025.
- The limit on annual contributions to an IRA is increased to $7,500 from $7,000.
Let’s get into more of the details to bring some greater Tax Clarity…
🧾 The numbers…clean and quick
Here are the changes for the various defined contribution plans, effective January 1, 2026:
Table 1: Annual Cost-of-Living Increases for Defined Contribution Plans (2026)
| Plan Type/Limitation | 2025 Amount | 2026 Amount | Change |
| IRC §415(c)(1)(A) – Annual Additions Limitation | $70,000 | $72,000 | +$2,000 |
| IRC §402(g) – Exclusion for Elective Deferrals (§401(k), §403(b), Thrift Savings Plan (TSP) for Federal employees) | $23,500 | $24,500 | +$1,000 |
| IRC §457(e)(15) – Limitation on Deferred Compensation Plans of state and local governments and tax-exempt organizations | $23,500 | $24,500 | +$1,000 |
| SIMPLE Plans – Salary Reduction | $16,500 | $17,000 | +$500 |
| SIMPLE Plans – Certain Plans | $17,600 | $18,100 | +$500 |
| SIMPLE Catch-Up (Age 50+) | $3,500 | $4,000 | +$500 |
| SIMPLE Catch-Up (Age 60-63) | $5,250 | $5,250 | No change |
| SIMPLE Catch-Up (Certain Plans, Age 50+) | $3,850 | $3,850 | No change |
| Starter 401(k)(16)(B)/Safe Harbor 403(b)(16(B) | $6,000 | $6,000 | No change |
| Limitation on Pension-Linked Emergency Savings Accounts (IRC §402A(e)(3)(A)(i)) | $2,500 | $2,600 | +$100 |
| Limitation for distributions to domestic abuse victims from applicable eligible retirement plans under IRC §72(t)(2)(K)(ii)(I) | $10,300 | $10,500 | +$200 |
| Annual Compensation Limit (IRC §§401(a)(17), 404(l), 408(k)(3)(C), 408(k)(6)(D)(ii)) | $350,000 | $360,000 | +$10,000 |
| Governmental Plans Compensation Limit (IRC §401(a)(17)) | $520,000 | $535,000 | +$15,000 |
| Limitation on Catch-Up Contributions (Age 50+) | $7,500 | $8,000 | +$500 |
| Catch-Up Contributions (Age 60-63) | $11,250 | $11,250 | No change |
| Roth Catch-Up Wage Threshold (IRC §414(v)(7)(A)) | $145,000 | $150,000 | +$5,000 |
The catch-up contribution amount for taxpayers age 60-63 remain the same as in 2025, as reported earlier in the October 1st edition of the Tax Clarity Newsletter, and announced in a Department of Treasury proposed rule1 published on September 16th.
The tax law also requires cost-of-living increases for the limitations on defined benefit plans, with the same effective date of January 1, 2026:
Table 2: Annual Cost-of-Living Increases for Defined Benefit Plans (2026)
| Limitation Type | 2025 Amount | 2026 Amount | Change |
| IRC § 415(b)(1)(A) – Annual Benefit Limit | $280,000 | $290,000 | +$10,000 |
| IRC § 415(b)(1)(B) – Benefit for Pre-2026 Separations | Previous limit × 1.0288 | Previous limit × 1.0288 | Multiplier: 1.0288 |
| IRC §409(o)(1)(C)(ii) ESOP 5-Year Distribution Period – Maximum Account Balance | $1,415,000 | $1,455,000 | +$40,000 |
| IRC §409(o)(1)(C)(ii) ESOP 5-Year Distribution Period – Lengthening Threshold | $280,000 | $290,000 | +$10,000 |
Lastly, there are numerous adjusted gross income (AGI) limitations based on marital filing status, subject to phase-out ranges. For these specifics, we recommend seeking the advice of a tax professional who can address the specifics of your situation.
There’s the scoop, everyone! Thanks for taking time to check out the Tax Clarity Newsletter. This will be the only scheduled issue in the month of November. If you want to join our mailing list, subscribe and receive a direct copy of every issue, or provide any feedback, send an e-mail to admin@sweetclarity.com.
Thank you so much and have a joyous Thanksgiving holiday!
References (2)
1 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500, IR-2025-111, November 13, 2025, accessed November 18, 2025.
2 Department of the Treasury, Catch-Up Contributions, 90 Fed. Reg. 44527 (September 16, 2025), https://www.federalregister.gov/documents/2025/09/16/2025-17865/catch-up-contributions
DISCLAIMER: The information in this newsletter is derived from public information, provided for education purposes. It is not provided as a financial advisory service and should be relied upon as such. For advice on a specific tax matter, please consult a tax professional.
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