2022 Tax Brackets & Retirement Contribution Limits

  by Robert Brauer

Stay up-to-date with the key 2022 figures recently released by the IRS.

IRS Figures for 2022 – What’s New?

It is a good idea to start looking at 2022 and how you will manage our finances in the coming year. Each year the IRS updates figures, and smart planners must adjust their financial plans accordingly.  Let’s take a moment to review some of the key figures that apply to retirement accounts, tax brackets, and Social Security.

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2022 Retirement Contribution Limits

Owners of traditional Individual Retirement Accounts (IRAs), Roth IRAs, and most employer-sponsored retirement plans will not see much change in 2022. For traditional and Roth IRAs, the annual contribution limit will remain steady at $6,000, with an additional $1,000 in “catch-up” contributions available to those who are age 50 or over. Please make note that the contribution limits are a combined total for all traditional and Roth IRAs owned by an individual.

Employer-sponsored plans, such as the 401(k), 403(b), and 457 plans will increase slightly for 2022, with a new contribution limit of $20,500 (with an additional $6,500 in “catch-up” contributions for those over 50), an increase of $1,000 from 2021 levels.  SIMPLE IRAs (special retirement plans for businesses with under 100 employees) will have a contribution limit of $14,000, an increase of $500 from 2021.

2022 Tax Brackets

For 2022, the same seven tax brackets for earned income will be in effect as in 2021. These are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These brackets are the same over several different filing statuses (individual, married filing jointly, married filing separately, head of household).

Tax Brackets Single Married Filing Jointly
10% $0 – $10,275 $0 – $20,550
12% $10,275 – $41,775 $20,550 – $83,550
22% $41,775 – $89,075 $83,550 – $178,150
24% $89,075 – $170,050 $178,150 – $340,100
32% $170,050 – $215,950 $340,100 – $431,900
35% $215,950 – $539,900 $431,900 – $647,850

Over $539,900 Over $647,850

For trusts and estates, the tax bracket is somewhat simplified. There will be only four brackets in 2022, at rates of 10%, 24%, 35% and 37%.

Tax Bracket Taxable Income Tax Due
10% $0 – $2,750 10% of Income
24% $2,751 – $9,850 $275 + 24% of amount over $2750
35% $9,851 – $13,450 $1,979 + 35% of amount over $9,550
37% Over $13,451 $3,239 + 37% of amount over $13,050

The standard deduction used by most filers on their tax returns will be increasing slightly in 2022. For individuals and married filing separately, the standard deduction will increase to $12,950 (up from $12,550 in 2021). For married filing jointly, the deduction will be $25,900 (up from $25,100 in 2021). For head of household, the deduction will be $19,400 (up from $18,800).

Filing Status Standard Deduction
Single $12,950
Married Filing Jointly $25,900
Married Filing Separately $12,950
Head of Household $19,400

2022 Contribution Phaseouts

If you own a traditional IRA that you make contributions to during a given tax year, you are generally allowed to take a tax deduction for your total contribution. However, this deduction begins to “phase out” (reduce in value) once your income exceeds a particular amount. The amount of the deduction then reduces gradually to zero when income reaches a second, higher amount.

For 2022, when income reaches $68,000, the phase-out of the IRA deduction will begin. The phase-out then continues until income reaches $78,000, at which point the deduction reaches zero. These two figures are slightly increased from the 2021 range of $66,000 to $76,000. Married persons filing jointly will have a range of $109,000 to $129,000 (up from $105,000 to $125,000) and $204,000 to $214,000 (up from $198,000 to $208,000) if the spouse who is contributing to the IRA is not covered by an employer-sponsored retirement plan.

For Roth IRAs, although there is no tax deduction for contributions, the amount that you can contribute begins to decrease after a certain income level is earned. For individuals, income must be below $129,000 to make the full contribution. After exceeding this level, the contribution amount phases out until $144,000 when it reaches zero. The maximum of $129,000 that can be earned without incurring the phase-out is increased from $125,000 in 2021. Married persons filing jointly begin the phase-out at $204,000 (up from $198,000) and reach zero at $214,000.

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Social Security COLA Adjustment

Social Security and Supplemental Security Income (SSI) benefits will see a cost-of-living-adjustment (COLA) for 2022. Benefits will increase by 5.9%, and the maximum amount of earnings subjected to Social Security tax will increase to $147,000 (up from $142,800 in 2021).

Miscellaneous Figures

A few miscellaneous figures that may be of some importance to you:

  • Alternative Minimum Tax: the exemption amount for calculation of the alternative minimum tax (AMT) is increased for single and married filers for 2022. Single filers have an exemption of $75,900 (up from $73,600) while married filers have an exemption of $118,100 (up from $114,600).
  • Capital Gains Tax Brackets: Capital gains rates will have the same three brackets as in 2021; these are 0%, 15%, or 20%. The majority of filers will pay 15%; the 20% rate only applies to those filers whose income incurs the 37% rate on earned income in 2021.
  • Estate Tax Exemption: For 2021, the federal estate tax exemption amount is $12.06 million per individual or a combined $24.12 million for a married couple. These are increased from $11.7 million and $23.4 million in 2021, respectively.
  • Required Minimum Distributions: As part of the provisions of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, the minimum age to begin taking RMDs has been increased to 72. This change went into effect in 2021, and will remain the same for 2022.  The IRS did update the Life Expectancy tables used to calculate RMDs.  When calculating your RMD, be sure to use the new tables or that the calculator is updated for 2022 numbers.  

Overall, the changes to the various figures described herein are generally modest, if indeed there are any at all. If you would like to discuss how the changes might affect you and your own accounts, we are always here to help.

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