IRS Posts 401(k), IRA Limits for 2022

 Commentary  November 05, 2021 at 07:44 AM  Share & Print

What You Need to Know

  • The amount that can be contributed to 401(k) plans in 2022 has increased to $20,500.
  • Also boosted for 2022: The income ranges for determining eligibility to make deductible contributions to traditional IRAs, Roth IRAs.
  • IRS also issued technical guidance regarding all of the cost of living adjustments

he Internal Revenue Service announced Thursday that the amount individuals can contribute to their 401(k) plans in 2022 has increased to $20,500, up from $19,500 for 2021 and 2020.

The limit on annual contributions to an IRA remains unchanged at $6,000. The IRA catch-up contribution limit for individuals aged 50 and older is not subject to an annual cost-of-living adjustment and remains $1,000, the IRS said.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,500.

Thus, the IRS said, “participants in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan who are 50 and older can contribute up to $27,000, starting in 2022.”

The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans remains unchanged at $3,000.

Other Matters

The IRS on Thursday also issued technical guidance regarding all cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2022 in Notice 2021-61.

It also boosted the income ranges for determining eligibility to make deductible contributions to traditional IRAs and Roth IRAs, and to claim the Saver’s Credit in 2022.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. “If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income,” the IRS explained.

If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.

The phase-out ranges for 2022 are:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to $68,000 to $78,000, up from $66,000 to $76,000.
  • For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to $109,000 to $129,000, up from $105,000 to $125,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is set to be $129,000 to $144,000 for singles and heads of household in 2022, up from $125,000 to $140,000.

For married couples filing jointly, the income phase-out range is being increased to $204,000 to $214,000, up from $198,000 to $208,000.

The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains at $0 to $10,000.

 


European Compliance Association

European Compliance Association

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