December 13, 2021 1:32 am

Revised Dollar Amounts for Retirement Plans and IRAs in 2022

Each year, the IRS can adjust various amounts used to figure contributions, benefits, deductions, and credits related to qualified retirement plans and IRAs. The IRS has now done so for 2022 amounts (Notice 2021-61). The adjustments reflect higher inflation, but not every dollar amount has been increased. Here are some highlights:

Elective deferrals. The limit on an employee’s elective salary deferrals in 401(k), 403(b), 457 plans, and the federal government’s Thrift Savings Plan is $20,500 ($1,000 higher than in 2021). The maximum catch-up contribution for those age 50 or older by the end of the year remains unchanged at $6,500, for a total deferral limit of $27,000. The limit on elective deferrals to SIMPLE IRAs is $14,000 ($500 more than in 2021). But the catch-up contribution remains at $3,000.

Contributions and benefits to qualified retirement plans. The limit for contributions to defined contribution plans, including profit-sharing plans and SEPs, is $61,000 (up $3,000 from $2021). The limit on benefits from defined benefit (pension) plans is $245,000 (up from $230,000 in 2021). The annual compensation that can be taking into account for figuring contributions and benefits is $305,000 (up from $290,000 in 2021).

Contribution limits for traditional and Roth IRAs. There is no change in the cap on annual contributions; it remains $6,000 (plus an additional $1,000 for those age 50 or older by the end of 2022).

Income limits for traditional and Roth IRAs. The modified adjusted gross income (MAGI) limits for deducting contributions to a traditional IRA if the taxpayer is an active participant in a qualified retirement plan or contributing to a Roth IRA have increased.

•       For traditional IRAs: For joint filers, the 2022 phaseout threshold begins at $109,000, and the phaseout is complete when MAGI is $129,000. For singles and heads of households, the phaseout threshold begins at $68,000, and the phaseout is complete when MAGI is $78,000. If one spouse is a participant and the other is not and they file jointly, the 2022 phaseout threshold begins at $204,000, and the phaseout is complete when MAGI is $214,000. For married persons filing separately, the phaseout range remains at zero to $10,000.

•       For Roth IRAs: For joint filers, the 2022 phaseout threshold begins at $204,000, and the phaseout is complete when MAGI is $214,000. For singles and heads of households, the phaseout threshold begins at $129,000, and the phaseout is complete when MAGI is $144,000. For married persons filing separately, the phaseout range remains at zero to $10,000.

Retirement savers credit. The adjusted gross income (AGI) limits for figuring the credit for elective deferrals, contributions to IRAs, and certain contributions to ABLE accounts have increased across the board. Some credit can be claimed as long as AGI does not exceed $68,000 on a joint return, $51,000 for heads of households, and $34,000 for other filers.

Other changes in dollar limits. These include:

•       Compensation for participation in SEPs: $650 (unchanged)

•       Highly-compensated employees: $135,000 ($5,000 higher)

•       Cap on contributions to qualified longevity contracts (QLACs): $145,000 ($10,000 higher)

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Tax Glossary

Intangible assets

Intangible assets that come within Section 197, such as goodwill, are amortizable over a 15-year period.

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