Almost every year brings with it a few tax law changes; it’s one of the things that makes tax law so complicated, and can make it so difficult to file your taxes on your own. While there were certainly plenty of changes for this tax year, here are the major highlights that every taxpayer should be aware of. These changes will impact millions of tax returns for the 2022 tax year. Keep reading to learn more.
Tax Bracket Changes
Tax brackets actually change just about every year, based on inflation from the previous year. Here are the new tax brackets that will be applied when you file your 2022 tax return:
| Tax Rate | For Single Filers | For Married Individuals Filing Joint Returns | For Heads of Households |
| 10% | $0 to $10,275 | $0 to $20,550 | $0 to $14,650 |
| 12% | $10,275 to $41,775 | $20,550 to $83,550 | $14,650 to $55,900 |
| 22% | $41,775 to $89,075 | $83,550 to $178,150 | $55,900 to $89,050 |
| 24% | $89,075 to $170,050 | $178,150 to $340,100 | $89,050 to $170,050 |
| 32% | $170,050 to $215,950 | $340,100 to $431,900 | $170,050 to $215,950 |
| 35% | $215,950 to $539,900 | $431,900 to $647,850 | $215,950 to $539,900 |
| 37% | $539,900 or more | $647,850 or more | $539,900 or more |
| Source: Internal Revenue Service | |||
Increased Retirement Contribution Limits
The contribution limit to qualifying employer-sponsored retirement plans has also increased for 2022. For elective deferral to 401(k)s, 403(b)s, most 457 plans, and the government’s Thrift Savings Plan, the limit is no $20,500. The maximum amount you and your employer can contribute to your retirement plan is up to $61,500 from the 2021 max of $58,000. The catch-up contribution amount for those 50 or older remains at $6,500.
Changes to Deductible Traditional IRA Contributions
While the contribution limit to IRAs remains unchanged for 2022 (a maximum annual contribution of $6,000 for those under 50, and a maximum of $7,000 for those 50 and older), there is a different change put in place for this year. If you are covered by an employer-sponsored plan, your income limit for receiving a deduction for your contributions increases for 2022.
If you are a single filer and earn under $68,000 in 2022, you can take the full deduction amount for your traditional IRA contributions. All deductions are eliminated if you earn $78,000 or more. For joint filers, the maximum deduction can be claimed for anyone earning $109,000 or less this year, and will phase out completely at $129,000 of annual income. If you’re not covered but your spouse is, your deduction will begin to phase out for income over $204,000, and will be eliminated at $214,000.
Income Limit Increase for Roth IRA Contributions
Roth IRAs offer great post-tax savings for retirement, but you cannot contribute to a Roth IRA if your income exceeds certain limits. That limit has increase this year. For single filers, your maximum Roth IRA contribution decreases at $129,000 of adjusted gross income; you cannot make a Roth IRA contribution if you earn more $144,000. For joint filers, those limits are $204,000 and $214,000, respectively.
Increased Standard Deduction
The standard deduction is also increasing this year for all filing statuses. Here are the new standard deduction rates:
- Single filers: $12,950
- Heads of household: $19,400
- Joint filers: $25,900
No Limitation on Itemized Deductions
This is not new for 2022, but is still a tax law worth noting. When the Tax Cuts and Jobs Act was passed, it abolished the limitation on itemized deductions for tax years 2018 through 2025. This means that you can itemize all deductions for charitable giving, job expenses, taxes and interest paid, and other qualifying expenses, regardless of your income levels. When this expires in 2025, the previous income limitations will be reestablished unless a new tax law passes.
While this might sound appealing, it is also worth pointing out that that TCJA doubled the standard deduction, so for most taxpayers, it is still most beneficial to take the standard deduction rather than itemizing. However, we strongly recommend that you work with a CPA to determine what the best option for you will be based on your exact circumstances and expenses.
If you want to learn more about how specific tax law changes will impact your next tax return, or if you still need help filing your 2021 tax return, contact Peter Witts CPA today, and our tax professionals will give you the guidance and support you need. Call now to schedule a consultation.