The Internal Revenue Service (IRS) has recently released its 2022 cost-of-living adjustments (COLAs) impacting pension plan dollar limitations as well as additional retirement-related provisions. Overall, the majority of pension plan limitations will change in 2022 because the increase in the cost-of-living index from inflation met the statutory thresholds, triggering their adjustments. Despite this, other limits will remain the same.

Overview of Changes for 2022

Employees who take part in 401(k), 403(b) and most 457 plans, as well as the federal government’s Thrift Savings Plan, will benefit from an increased contribution limit of $20,500 (up $1,000 from last year). The annual limit for IRA contributions stays the same at $6,500, and the catch-up contribution limit for individuals 50 and over also remains at $3,000. When determining eligibility to make deductible contributions to IRAs, Roth IRAs and claiming the Saver’s Credit, the income ranges increased.

Phase-Out Thresholds

When a taxpayer meets specific conditions, they may deduct contributions to a traditional IRA. If a taxpayer or their spouse participates in a retirement plan at work, the deduction phases out, depending on the individual’s income and filing status. For example, if covered by a workplace retirement plan, the phase-out thresholds are as follows:

  • $68,000 to $78,000 for single taxpayers, up from $66,000 to $76,000.
  • $109,000 to $129,000 for joint filers when the spouse making contributions is an active participant, up from $105,000 to $125,000.
  • $204,000 to $214,000 for IRA contributors not covered by a workplace retirement plan but their spouse is, up from $198,000 to $208,000.
  • $0 to $10,000 for married individuals filing separately, the same as last year.

The phase-out thresholds for Roth IRA contributions are:

  • $129,000 to $144,000 for single individuals and heads of household
  • $204,000 to $214,000 for joint filers
  • $0 to $10,000 for married individuals filing separately

The income limits for the Saver’s Credit are:

  • $68,000 for joint filers
  • $51,000 for heads of household
  • $34,000 for single individuals and married individuals filing separately

For more information on these updated amounts and how they will impact your unique tax situation in 2022, contact Doeren Mayhew’s tax advisors today.