Heading into 2022 make sure you have the most up-to-date information for tax planning. This article summarizes the updated thresholds and limits for tax planning 2022.
FICA base – Annual compensation to which Social Security tax applies is $147,000 for 2022 (up from $142,800 in 2021).
Social Security benefits – Individuals who are drawing Social Security benefits prior to attaining full retirement age will begin to suffer reductions in payments if they have earned income exceeding $19,560 in 2022 (up from $18,960 in 2021).
Adjustments for retirement accounts – The maximum annual addition to a defined contribution plan is increased to $61,000 for 2022 (up from $58,000 for 2021), and the corresponding maximum amount of compensation that can be considered as the base for retirement plan contributions is $305,000 for 2022 (up from $290,000 for 2021).
Some Individual Retirement Account (IRA) limits, elective deferral limits, and catch-up contribution limits have remained the same for 2022 and some have changed. Please see the chart below for details.
|
Year |
IRAs |
SIMPLE IRA Plans |
Other Employer Plans |
|||
|
|
Annual Contribution |
Catch-Up Contribution |
Elective Deferral |
Catch-Up Contribution |
Elective Deferral |
Catch-Up Contribution |
|
2021 |
$6,000 |
$1,000 |
$13,500 |
$3,000 |
$19,500 |
$6,500 |
|
2022 |
$6,000 |
$1,000 |
$14,000 |
$3,000 |
$20,500 |
$6,500 |
Kentucky’s pension income exclusion – The amount of retirement income excludable from tax in Kentucky remains $31,110 for 2022.
Health savings accounts – The limits on contribution deductions for 2022 are $3,650 for self-only coverage (up $50 from 2021) and $7,300 for family coverage (up $100 from 2021). The additional “catch-up” contribution allowable for those age 55 or older remains $1,000.
Health flexible spending arrangements – The maximum voluntary employee salary reduction for employer-adopted FSAs (flexible spending arrangements) is $2,850 for 2022 (up $100 from 2021).
Estate tax – Federal estate, gift, and generation-skipping taxes will apply to cumulative subject transfers exceeding $12,060,000 in 2022, up from $11,700,000 in 2021.
Gift taxes – The annual exclusion for gifts per donee is $16,000 for 2022 (up $1,000 from 2021). The exclusion for gifts given to non-citizen spouses is increased to $164,000 (up from $159,000 in 2021).
Nanny tax – Cash wages paid for domestic service in the employer’s home of less than $2,400 are not subject to FICA in 2022 (up from $2,300 in 2021).
Foreign earned income exclusion – For tax year 2022, the foreign earned income exclusion is $112,000 (up from $108,700 for tax year 2021).