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Updated Tax Thresholds and Limits for 2022

By: Dean Dorton | December 7, 2021

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.

Tax

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).

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