401(k) Increases to $20,500

The IRS has announced that the amount an individual can contribute to their 401(k) plans in 2022 has been raised to $20,500, as opposed to $19,500 in 2021. Taxpayers can deduct contributions to traditional IRAs contingent upon meeting certain conditions. However, there will be some deductions reduced or phased out depending on filing status and income. The phase-out ranges are as followed:

- 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.

These phase-out ranges for taxpayers contributing to Roth IRAs have increased to $129,000 to $144,000 for single tax payers, and for married couples filing jointly $204,000 to $214,000. The range for a married individual filing a separate tax return remains at $0 to $10,000. Further, the amount that an individual can contribute to their SIMPLE retirement accounts has increased up to $14,000.

However, some contribution limits haven’t changed at all. The limit on annual contributions to an IRA remains at $6000, and the IRA catch-up contribution for individuals 50+ are not subject to cost of living adjustment, therefore remaining at $1000.

Interested in contributing to your 401(k)? Check out the full list of adjustments on the IRS website and then contact the professionals at The Center for Financial, Legal, and Tax Planning, Inc. They are more than knowledgeable in regard to 401(k) and new tax provisions surrounding them. Please contact us at (618) 997-3436 for more information.