Inflation adjustments for 2022

Annual revenue procedure updates amounts in 62 Code sections.

The IRS issued Rev. Proc. 2021-45, adjusting for inflation a wide array of amounts applicable to the 2022 tax year for use with individual, business, and estate and trust returns and related tax issues. Amounts under 62 Code sections are updated.

Some of the most common figures include the income tax tables for individuals and estates and trusts, generally with higher tax bracket thresholds than for 2021. For example, the bottom bracket for a single individual (other than heads of household and surviving spouses), in which taxable income is subject to a 10% tax, has a ceiling in 2022 of $10,275, an increase of $325 from the 2021 amount of $9,950.

Another frequently used amount, the standard deduction, is $12,950 for single taxpayers (and married individuals filing separate returns), $25,900 for married taxpayers filing jointly, and $19,400 for heads of household, which for 2021 were $12,550, $25,100, and $18,800, respectively.

IRS makes 2022 inflation adjustments for retirement accounts

401(k) maximum contributions are higher; IRAs are unchanged.

The IRS issued Notice 2021-61 updating for 2022 dollar-amount ceilings and thresholds for a wide range of qualified retirement plans and accounts, including traditional individual retirement arrangements (IRAs) and Roth IRAs. The notice also has the 2022 limits on elective deferrals for plans under Sec. 401(k) and Sec. 403(b) and most plans under Sec. 457.

The limitation on deferrals for 401(k), 403(b), and most 457 plans is increased to $20,500 for 2022, up from $19,500 in 2021. The limitation on the annual benefit under a defined benefit plan under Sec. 415(b)(1)(A) is increased from $230,000 to $245,000. The limitation on the annual addition (employer and employee contributions and forfeitures) for defined contribution plans under Sec. 415(c)(1)(A) is increased from $58,000 to $61,000.