The Internal Revenue Service recently announced that the amount individuals can contribute to their 401(k)s in 2022 has officially increased to $20,500. This is a $1,000 increase from 2021 and 2020.
Social Security 2022: How the COLA Will Increase Benefits for the Average Senior Couple
Tax Brackets 101: Here Are the Basics You Need To Understand
The IRS also issued guidance regarding all of the cost-of-living adjustments (COLA) affecting dollar limitations for pension plans and other retirement-related items for 2022. These limits are required to be increased every year to account for COLA. Other limitations applicable to deferred compensation plans are also affected by these adjustments.
In addition to surging inflation and COLA increases, the income ranges for determining eligibility to make deductible contributions to IRAs and Roth IRAs and to claim the Saver’s Credit have all increased for 2022.
As a taxpayer, you can deduct contributions to a traditional IRA under certain condition. For example, if either you or your spouse was covered by a retirement plan at work during the year, the deduction may be reduced or phased out until it is eliminated (depending on filing status and income).
Social Security: How to Boost Your Benefit by $800
Social Security Schedule: When the First COLA Checks Will Arrive in January 2022
Here are the IRS phase-out ranges for 2022:
For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to $68,000 to $78,000 (up from $66,000 to $76,000)
For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to $109,000 to $129,000 (up from $105,000 to $125,000)
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to $204,000 to $214,000 (up from $198,000 to $208,000)
For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Income phase-out ranges for those making contributions to Roth IRAs also increased. The new ranges are $129,000-$144,000 for single filers and heads of households and $204,000-$214,000 for married couples filing jointly. Those who are married and file a separate return from their spouse are not subject to a COLA and remain $0-$10,000.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: Retirement 2022: IRS Announces New COLA Guidance, 401(k) and IRA Income Limit Increases