CPAs and other accounting professionals take note: The limit on retirement plan deferrals for next year is increasing. In this article, Ken Berry breaks down the changes to the phase-out ranges of retirement plans so you can be better prepared to help clients with retirement.
The numbers are in: Among other changes, the IRS has announced that the limit on 401(k) plan deferrals for 2022 is increasing by the hefty amount of $1,000. But the limits on contributions to IRAs are remaining the same (IR-2021-216, 11/4/21).
Here are the details: The contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan is increasing to $20,500 for 2022, up from $19,500 in 2021. The maximum “catch-up contribution” for someone 50 or older remains at $6,500. Thus, someone in their fifties or sixties can defer as much as $27,000 to a 401(k) in 2022.
The income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs and to claim the retirement saver's credit are all increasing for 2022.
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If either the taxpayer or their spouse is covered by a retirement plan at work, the deduction may be reduced or phased out until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-out of the deduction doesn’t apply.)
The new phase-out ranges announced by the IRS for 2022 are as follows:
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Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a...