Acadia Clients: Top Topics

In This Issue:

1. Retirement Plan Changes for 2022

2. IRS Inflation Adjustments for 2022 

3. Notable Tax Changes in Recent Legislation

Top Topics is a timely email for Acadia Clients only.  We are providing information and guidance on current issues of great importance to you.

Bass Harbor Lighthouse, Acadia National Park, Maine.  Image courtesy of Joe Braun

Change Is Constant

The Greek philosopher Heraclitus said, "Change is the only constant in life."  Although he lived 500 years before Christ, he must have been thinking about the IRS!  Fortunately, Acadia Clients have a financial "lighthouse" to help them navigate the many changes in store for us in 2022.

Topic:  Retirement Plan Changes for 2022

The US Treasury announced inflation-adjusted limits for some retirement account savings.  Workplace plans have increased while contribution limits for Individual Retirement Accounts remain unchanged.

Workplace Retirement Plans:  401(k), 403(b), 457(b) and Thrift Savings Plan

• 2022 Limit:  $20,500 ($1,000 increase over 2021)
• Catch-up contributions (for employees aged 50+) is unchanged at $6,500 (for a total of $27,000 in 2022 if you are 50+)
• Special Catch-up for 457(b) (for last three years of employment) increased to $41,000
• SIMPLE IRA plans for small business increased to $14,000 ($500 increase over 2021)

NOTE:  There are NO changes to Traditional and Roth IRA limits for 2022.  Amount remains $6,000 with a $1,000 Catch-up for ages 50+.

Topic:  IRS Inflation Adjustments for 2022

Some parts of the IRS Tax Code are automatically adjusted each year due to inflation.  It can help keep ensure taxpayers have essentially the same access to IRAs from year to year.

Income Limit Eligibility for Roth IRA Contributions

• Single and Head of Household phase-out range is $129,000 to $144,000
• Married Filing Jointly phase-out range is $204,000 to $214,000
• NOTE:  These income limits do not apply to Roth conversions.

Income Limit for Traditional IRA Contribution Deduction

• Single:  Phase-out range is $68,000 to $78,000
• Married with one spouse making contributions and that spouse is covered by an employer plan:  Phase-out range is $105,000 to $125,000
• Married with spouse making contributions and is not covered by an employer plan (but other spouse is covered): Phase-out range is $204,000 to $214,000
• Married Filing Separately with employer plan:  Phase-out range is $0 to $10,000
• Married or Single with no employer plan: IRA contributions are fully deductible

Phase-out Defined:  Refers to the gradual reduction of a tax credit, deduction or opportunity as income approaches the upper limit.

Topic:  Notable Tax Changes in Recent Legislation

Charitable Deductions:  Various acts were continued which allow you to deduct up to 100% of your adjusted gross income (AGI).  This opportunity only applies if you itemize.

Not planning to itemize?  The "above-the-line" charitable deduction increases to $600 for 2022.

Gift Tax Exclusion:  Increases to $16,000 in 2022, up from $15,000 in 2021.

Federal Estate Tax Exemption:  Increases to $12.06 million per individual and $24.12 per married couple for 2022.

Child Tax Credit:  Still in deliberation and may be extended via the Build Back Better Act.

State and Local Taxes (SALT):  Still in deliberation with a proposed increase to (possibly) $80,000.

NOTE:  Thus far, legislation does NOT prohibit same-year Roth Conversions (also known as a "Backdoor Roth").

All IRS news releases can be found HERE.