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This past Wednesday, the Internal Revenue Service released inflation adjustments on various tax items for the year 2022. I thought you would find it helpful if you had some of the vital numbers all in one place. There are over 60 items in their November 10 report, and you can obtain the complete list by following this link: https://www.irs.gov/pub/irs-drop/rp-21-45.pdf. [1] Now, we’ll take a look at some of the numbers most impactful to you and your clients:
Standard Deduction
$25,900
For married couples filing jointly.
$12,950
For single taxpayers and married individuals.
$19,400
For heads of households.
Personal Exception
$0
It is the same as 2021 due to the Tax Cuts and Jobs Act eliminating the personal exemption.
Marginal Rates
37%
The top tax rate remains as it was in 2021 for individual single taxpayers with incomes higher than $539,900 and $647,850 for married couples filing jointly.
The other rates for married couples filing jointly are:
35% for incomes over $215,950 ($431,900 for married couples filing jointly);
32% for incomes over $170,050 ($340,100 for married couples filing jointly);
24% for incomes over $89,075 ($178,150 for married couples filing jointly);
22% for incomes over $41,775 ($83,550 for married couples filing jointly);
12% for incomes over $10,275 ($20,550 for married couples filing jointly).
The lowest rate is 10% for incomes of single individuals with incomes of $10,275 or less ($20,550 for married couples filing jointly).
Capital Gains Tax
0% – 15 – 20%
Single
0% taxable income up to $41,675.
15% taxable income of $41,675 to $459,750.
20% taxable income over $459,750.
Married filing jointly
0% taxable income up to $83,350.
15% taxable income of $83,350 to $517,200.
20% taxable income over $517,200.
Married filing separately
0% taxable income up to $41,675.
15% taxable income of $41,675 to $258,600.
20% taxable income over $258,600.
Head of household
0% taxable income up to $55,800.
15% taxable income of $55,800 to $488,500.
20% taxable income over $488,500.
Earned Income Tax Credit
$6,935
This number is for qualifying taxpayers who have three or more qualifying children. The revenue procedure contains a table providing the maximum EITC amount for other categories, income thresholds, and phase-outs.
Unified Credit Estate Tax Exclusion
$12,060,000
The basic exclusion amount for estates of people who pass away in 2022, or a total of $24,120,000 for a couple. This is set to sunset per individual to around $6 million in 2026.
Gift Exclusion
$16,000
The annual individual exclusion for gifts.
Credit for Adoption
$14,890
The maximum credit allowed for qualified adoption expenses.
Qualified Plan Contribution Limits
$20,500
For employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan.
401(K) Catch-up Contribution Limit
$6,500
Unchanged for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan. Therefore, 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.
IRA Contribution Limits
$6,000
Unchanged from 2021.
IRA Catch-up Contribution
$1,000
Unchanged from 2021.
Roth Conversion Limits
Roth Conversion income phase-out’s are from $129,000 to $144,000 for single savers and from $204,000 to $214,000 for couples filing together.
Deductible IRA Limits
A married couple may be able to deduct their IRA contributions if both spouses are not participating in an employer’s retirement plan and have adjusted gross income of $66,000. A partial deduction is allowed if they earn AGI of less than $76,000.
Access Your Free Laminated Key Financial Data Sheet for 2022
It has been an exciting year with all the tax changes discussed throughout 2021, and while these changes may occur at any time, so far, they are not as extreme as we feared.
Click the button below to fill out a quick form and you will be added to our waitlist to receive a laminated key financial data sheet for 2022. This will allow you to quickly reference these important numbers when working with your clients.
Sources:
[1] https://www.irs.gov/pub/irs-drop/rp-21-45.pdf
Disclosure: This document is provided for informational purposes only by Dunham & Associates Investment Counsel, Inc. solely in its capacity as a Registered Investment Adviser and should not be construed as legal and/or tax advice. Dunham & Associates Investment Counsel, Inc. does not provide tax, legal or accounting advice. This material is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.