With 2021 almost in the books, it’s time to take a look at the coming year, and specifically, the key tax changes that will take effect in 2022.
Earlier this fall, The Internal Revenue Service announced annual inflation adjustments for tax year 2022, meaning new tax-rate schedules and tax tables as well as cost-of-living adjustments for various tax breaks. Most numbers are up more than in recent years because of higher inflation, based on the Consumer Price Index (CPI) and if you want to see all of them in detail, you can Click Here for the IRS Revenue Procedure 2021-45. We will highlight some of the more relevant tax numbers below, in addition to the contribution/deferral limits for retirement plans in the coming year.
2022 Retirement Plan Contribution/Deferral Limits
The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), and most 457 plans has increased by $1,000 to $20,500. The “catch-up” adjustment for those over age 50 remains unchanged at $6,500. That means the total limit for those over age 50 in 2022 will be $27,000.
The contribution limits for Traditional and Roth IRAs remain unchanged at $6,000. The “catch-up” adjustment for those over age 50 also remains at $1,000, thus making the total contribution limit $7,000 for those over age 50.
2022 Tax Bracket and Rates
There are seven tax rates in 2022: 10%, 12%, 22%, 24%, 32%, 35% and 37%, and the complete tables by filing status, are available in the link to the IRS publication above.
2022 Standard Deduction Amounts
The standard deduction amounts will increase to $12,950 for individuals and married couples filing separately, $19,400 for heads of household and $25,900 for married couples filing jointly and surviving spouses.
2022 Capital Gains Tax
Capital gains tax rates remain the same for 2022, but the brackets for the rates will change. The details can be found in the IRS Revenue Procedure 2021-45 as well.
2022 Estate & Gift Tax Exclusions
The basic Federal exclusion amount for decedents who die in 2022 will increase to $12,060,000 for an individual, up from $11,700,000 in 2021 and $24,120,000 for a married couple, up from $23,400,000 in 2021.
The annual exclusion for gifts for 2022 will increase to $16,000 for an individual, up from $15,000 in 2021, and $32,000 for a married couple, up from $30,000 in 2021.
Social Security & Medicare
The Social Security Administration announced there will be a 5.9% increase in Social Security benefits for 2022. The maximum amount of earnings subject to Social Security tax also will increase to $147,000.
The maximum Social Security benefit for a worker retiring at full retirement age in 2022 will be $3,113 per month.
On November 12, the Centers for Medicare and Medicaid Services announced that the Part B Medicare premiums will be increasing $21.60 to $170.10 for 2022. The annual deductible for Medicare Part B beneficiaries is increasing $30 from $203 to $233.
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