The Internal Revenue Service announced Friday it is raising the 2023 401(k) contribution cap for individuals by $2,000, to $22,500 — its biggest increase ever to the limit, by percentage and dollar terms.

For those age 50 and over, the catch-up contribution is being raised by $1,000, to $7,500.

That means those under the age of 50 will be able to save a total of $22,500 in their 401(k) plan, and those 50 and over will be able to sock away $30,000 a year in their 401(k).

The IRS is also increasing the annual contribution limit on individual retirement accounts (IRAs) by $500, to $6,500. The IRA catch-up for those 50 and over will also go up by $1,000 a year, to $7,500.

For self-employed workers in an individual 401(k) or a Simplified Employee Plan (SEP) retirement plan, the IRS is raising the 2030 contribution limit by $5,000, to $66,000. Older employees will be able to contribute an additional $2,500, for a total permissible contribution of $73,500.

The 401(k) contribution limit news comes on the heels of an announcement earlier this week by the IRS that, due to inflation, it is raising the standard deduction for tax filers’ earnings in 2023, affecting their 2024 returns.

The new standard deduction amounts for 2023 are:

• $27,700 for married couples filing jointly (up $1,800 from 2022);
• $13,850 (up $900) for single taxpayers and married individuals filing separately.
• $20,800 (up $1,400) for heads of households.