Key Tax Changes For 2022
It’s a new year and that generally means inflation adjustments to qualified retirement plan contribution limits as well as changes to other tax benefits and penalties. Here’s a brief summary of the changes most commonly utilized for 2022:
401(k) & 403(b) plans:
- Salary deferral limited to $20,500 (plus $6,500 if over age 50).
- Total additions (for plans allowing after-tax contributions) limited to $61K*.
Traditional & Roth IRA accounts:
- Contributions limited to $6,000 (plus $1,000 if over age 50).
- Roth contribution phase-out starts when modified adjusted gross income (MAGI) exceeds $129K (single) and $204K (married).
- IRA deductibility phase-out (if covered by employer plan) starts when MAGI exceeds $68K (single) and $109 (married).
- IRA deductibility phase-out (if spouse covered by employer plan) starts when MAGI exceeds $204K.
- Qualified longevity annuity premiums limited to lesser of $145K or 25% of IRA balance.
SEP IRA accounts:
- Contributions limited to lesser of $61,000 maximum total additions or 25% of earned income.
Estate & gifting:
- Annual gift tax exclusion increases to $16,000 (unlimited between spouses except $164K limit to non-US spouse).
- Estate tax exclusion increases to $12.06M.
Medicare Income Related Monthly Adjustment Amounts (IRMAA):
- Monthly cost surcharges start when MAGI exceeds $91K (single) and $182K (married)
Health Savings Accounts
- Contributions limited to $3,650 (single) and $7,300 (married) (plus $1,000 if over age 55)
Itemizing (or not) tax deductions:
- Standard deduction increases to $12,950 (single) and $25,900 (married).
- State & local tax (SALT) deduction remains limited to $10,000*.
Long-Term Capital Gains (LTCG) taxes:
- 0% for MAGI less than $40,400 (single) and $80,800 (married)
- 15% for MAGI between above and $445.85K (single) and $501.6K (married)
- 20% for MAGI higher than above
- Additional 3.8% net investment income tax (NIIT) for MAGI higher than $200K (single) and $250K (married)
*Note that the Build Back Better legislation currently being debated in Congress may impact contributions to and withdrawals from Roth & IRA accounts for very high net worth taxpayers as well as 401(k) after-tax contributions & SALT tax deductibility for all taxpayers.