INCREASED THRESHOLD FOR RETIREMENT LIMITS

Increased threshold for retirement limits. The Internal Revenue Service announced 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 IRS has alsoissued technical guidance regarding all of the cost of living adjustments affecting dollar limitations for pension plans and other retirement related items for tax year 2022, in Notice 2021-61, which was published November 4th, 2021. The increased $20,500 threshold applies to employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan. Increased threshold for retirement limits.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs) , to contribute to Roth IRAs, and to claim the Saver’s Credit all increased for 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. (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 IRS has further announced the income limit for the Saver’s Credit, also known as the Retirement Savings Contributions Credit, for low and moderate income workers is $68,000 for married couples filing jointly, $51,000 for heads of household, and $34,000 for singles and married individuals filing separately. The amount individuals can contribute to their SIMPLE retirement accounts is increased to $14,000. For 2022, the limit on annual contributions to an IRA remains unchanged at $6,000. The IRA catch up contributions limit for individuals aged 60 and over is not subject to an annual cost of living adjustment and remains $1000 More information can be found at the IRS website IRS.GOV