The Standard Tax Deduction Rises in 2022
All taxpayers are eligible to take the standard tax deduction unless they elect to itemize their deductions. The standard tax deductions for 2022 are:
Single: $12,950 (up from $12,550 in 2021)
Head of Household: $19,400 (up from $18,800)
Married Filing Jointly: $25,900 (up from $25,100)
Married Filing Separately: $12,950 (up from $12,550)
Tax Bracket Increases for 2022
Federal taxes are calculated on tax brackets depending upon your filing status. Tax brackets are adjusted for inflation each year. In 2022, the minimum income levels for top tax brackets are as follows:
Single: $539,901 (up from $523,601 in 2021)
Head of Household: $539,901 (up from $523,601 in 2021)
Married Filing Jointly: $647,851 (up from $628,301 in 2021)
Married Filing Separately: $332,926 (up from $314,151 in 2021)
Employer-Sponsored Retirement Contribution Limits Increase in 2022
In 2022, contributions an employer can make to an employee's SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $61,000 for 2022 (up from $58,000 for 2021). Additionally, the contribution limit for elective deferrals to 401(k), 403(b), most 457 plans, and the Thrift Savings Plan increases to $20,500.
Contribution Deductions for Traditional IRA Income Restrictions Rise
Even though the contribution limits for IRAs remain unchanged in 2022 at $6,000 for those under 50 and $7,000 if you are 50 or older, the IRS did declare a couple of tax changes that impact IRAs. For instance, for those who are covered by an employer-sponsored plan, your income limit increases for those who still qualify for a contribution deduction.
Single Filers: The maximum deduction is reduced at $68,000 in 2022 (up from $66,000 in 2021) and is entirely phased out at $78,000 or more (up from $76,000).
Married Filing Jointly: The maximum deduction is reduced at $109,001 (up from $105,001 in 2021) and is completely phased out at $129,000 (up from $125,000).
Additionally, if your spouse is covered, but you are not, your maximum deduction is reduced at $204,001 in 2022 (up from $198,000 in 2021) and is entirely phased out at $214,000 (up from $208,000).
Income Limitations To Contribute to a Roth IRA Rise
Roth IRAs can offer beneficial after-tax savings for retirement; however, you are forbidden from contributing if your income is too high. Here are the income limitations for 2022:
Single filers: Your maximum contribution is reduced when your modified adjusted gross income is $129,000 (up from $125,000 in 2021) and entirely phased out at $144,000 (up from $140,000).
Joint filers: Your maximum contribution is reduced when your modified adjusted gross income is $204,000 (up from $198,000) and completely phased out at $214,000 (up from $208,000).
HSA Contributions Slightly Rise in 2022
Health savings accounts allow you to save money in a specialized tax-advantaged account to use on future medical expenses. The amount you can contribute increases to $3,650 for individual coverage (up from $3,600 in 2021) and $7,300 for family coverage (up from $7,200) in 2022.
Gift Tax Limits Rise
In 2022, the annual gift tax exclusion increases to $16,000 from $15,000. In other words, this is the amount you can give to each person before you are responsible for paying gift taxes.
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