Posted: 4-1-22 | Innovia Wealth
It’s April, so we are in the thick of the 2021 tax season. Currently, the Internal Revenue Service is experiencing a significant backlog in processing returns, so factoring possible delays into your expectations may help reduce your frustration with the IRS. There are also changes in 2022 income and contribution limits that you should keep in mind as you calculate how much you would like to set aside for your retirement goals this year. In this blog we will list some of the changes the IRS has made.
2022 Retirement Plan Contribution Limits
This year taxpayers will be able to increase the contributions they make to their 401(k), 403(b) plans as well as to most 457 plans and the U.S. Thrift Savings Plan. The new limit is $20,500. The IRS also announced specific cost-of-living adjustments that may affect people’s pension plans and retirement savings in 2022.
Traditional and Roth IRA contribution limits will remain $6,000 for people under 50 years of age. For those over 50, the limit is $7,000. Under certain circumstances, taxpayers may deduct contributions to a traditional IRA. For example, if within a household neither the taxpayer nor their spouse has a work retirement plan, their entire contribution to a traditional IRA is deductible. If either of the two is covered by a work retirement plan, the deduction may be reduced or phased out until it is eliminated. Below are the income phase-out ranges for traditional IRA contributions in 2022:
- $68,000 to $78,000 – Single taxpayers covered by a workplace retirement plan
- $109,000 to $129,000 – Married couples filing jointly. This applies when the spouse making the IRA contribution is covered by a workplace retirement plan.
- $204,000 to $214,000 – A taxpayer not covered by a workplace retirement plan married to someone who’s covered.
- $0 to $10,000 – Married filing a separate return. This applies to taxpayers covered by a workplace retirement plan
For Roth IRA contributions, the income phase-out ranges are:
- $129,000 to $144,000 – Single taxpayers and heads of household
- $204,000 to $214,000- Married, filing jointly
- $0 to $10,000 – Married, filing separately
For Saver’s Credit, the income phase-out ranges are:
- $41,000 to $68,000 – Married, filing jointly.
- $30,750 to $51,000 – Head of household.
- $20,500 to $34,000 – Singles and married individuals filing separately.
For SIMPLE retirement accounts, the amount individuals will be able to contribute in 2022 increases to $14,000.
This year there are also increases in the amount of money taxpayers can contribute to other retirement plans. These are:
- Catch-Up Contribution Limit for 401(k), 403(b) and 457 Plans: $6,500
- Maximum Compensation Limit for Qualified Retirement Plans: $305,000
- Annual Additions Limit for Defined Contribution Plans: $61,000
- Annual Benefit Limit for Defined Benefit Plans: $245,000
- Annual Compensation for Classification of Highly Compensated Employees: $135,000
- Annual Compensation for Classification of a Key Employee: $200,000
2022 HSA Limitations
The annual HSA contribution limits have also been raised. For self-only HDHP coverage, the new limit is $3,650, and for family HDHP coverage, it is $7,300. The HSA catch-up contribution limit for individuals age 55 and over remains the same at $1,000. The maximum HDHP out-of-pocket expense limit increases slightly to $7,050 for self-only HDHP and $14,100 for family HDHP coverage.
There are also a number of changes to tax rates and exemptions as well as charitable deductions in 2022. If you would like to be proactive in how you approach your saving and giving this year, please contact our team at Innovia Wealth. We will be happy to meet with you and help you create a strategy that will minimize your tax burden and allow you to maximize the effect of your retirement savings and charitable contributions.