IRS makes retirement account inflation adjustments for 2022

By Paul Bonner

This IRS issued Notice 2021-61 Thursday 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 for defined contribution plans under Sec. 415(c)(1)(A) is increased from $58,000 to $61,000.

Here are some of the other new or unchanged amounts for 2022:

  • The deductible amount under Sec. 219(b)(5)(A) for an individual making qualified retirement contributions, including to IRAs and Roth IRAs, remains unchanged at $6,000.
  • The annual compensation limit under Secs. 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $290,000 to $305,000.
  • The limitation under Sec. 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $13,500 to $14,000, while the Sec. 408(k)(2)(C) compensation amount regarding simplified employee pensions (SEPs) remains unchanged at $650.
  • The adjusted gross income (AGI) limit for the saver's credit is $68,000 for married couples filing jointly, $51,000 for heads of household, and $34,000 for single taxpayers and for married individuals filing separately, all increases from 2021.

The income phaseout range for single taxpayers and heads of household making contributions to a Roth IRA is $129,000 to $144,000, up from $125,000 to $140,000. For married couples filing jointly, the income phaseout range is $204,000 to $214,000, up from $198,000 to $208,000. The phaseout range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The notice also updates income phaseouts applicable to contributions to certain plans and accounts, including when the taxpayer or his or her spouse is covered by a retirement plan at work. Here are the phaseout ranges for 2022, compared with 2021:

  • Single taxpayers and heads of household covered by a workplace retirement plan are subject to a phaseout range for deductible contributions to a traditional IRA of $68,000 to $78,000, up from $66,000 to $76,000.
  • Married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, are subject to a phaseout range of $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 deduction is phased out if the couple's income is between $204,000 and $214,000, up from $198,000 and $208,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phaseout range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Paul Bonner (Paul.Bonner@aicpa-cima.com) is a JofA senior editor.

SPONSORED REPORT

Get your clients ready for tax season

Upon its enactment in March, the American Rescue Plan Act (ARPA) introduced many new tax changes, some of which retroactively affected 2020 returns. Making the right moves now can help you mitigate any surprises heading into 2022.

100th ANNIVERSARY

Black CPA Centennial, 1921–2021

With 2021 marking the 100th anniversary of the first Black licensed CPA in the United States, a yearlong campaign kicked off to recognize the nation’s Black CPAs and encourage greater progress in diversity, inclusion, and equity in the CPA profession.