As you read over these changes, let me know if you have questions or would like to know if/how they apply to you. I’m here to find ways to help you save and pay no more than you need to this tax year and always.
- Tax brackets increase. Here are the adjusted minimum income levels for the top tax brackets for each filing status for 2022:
- Single: $539,901 (up from $523,601 in 2021)
- Head of household: $539,901 (up from $523,601 in 2021)
- Married filing jointly: $647,851 (up from $628,301 in 2021)
- Married filing separately: $332,926 (up from $314,151 in 2021)
- Standard deduction rises. All taxpayers are entitled to the standard deduction unless they itemize their deductions. Here are the 2022 standard deductions:
- Single: $12,950 (up from $12,550 in 2021)
- Head of household: $19,400 (up from $18,800)
- Married filing jointly: $25,900 (up from $25,100)
- Married filing separately: $12,950 (up from $12,550)
- Retirement contribution limits increase, too. The 2022 contribution limit for elective deferrals to 401(k), 403(b), most 457 plans, and the Thrift Savings Plan (for federal employees and members of the uniformed services) increases to $20,500. The total you and your employer can contribute combined also rises to $61,500 from $58,000. Note that the catch-up contribution for taxpayers aged 50 and older remains at $6,500.
- Health savings account (HSA) limits go up. For 2022, the amount you can set aside for qualified medical expenses increases to $3,650 for self-only coverage and $7,300 for family coverage.
- Earned income credit decreases for individuals with no children. The earned income tax credit (EIC) is a refundable tax credit for low- and moderate-income Americans. The credit amount depends on income and the number of children, but workers without children can still qualify. In fact, the largest change for 2022 is a significant decrease in the credit for persons with no children. This is because the American Rescue Plan boosted it from $543 to $1,502 in 2021; however, this increase doesn’t apply in 2022.
- The estate tax exemption and gift tax limits will rise. In 2022, the federal estate tax exemption grows to $12.06 million from $11.7 million. The gift tax annual exclusion also increases to $16,000 from $15,000 in 2021.
- Capital gains tax thresholds increase. Although the capital gains tax rates for long-term investments remain the same for 2022, income thresholds have increased. Learn more about 2022 capital gains tax rates on the IRS’s website.
I hope you found this information helpful. If nothing else, you’re better prepared than most to finish out the year strong from a tax perspective.
As always, if we can be of assistance to you, please reach out anytime—that’s why we’re here!