Retirement Contribution Caps Raised

The amount an individual can contribute to a qualified retirement plan in 2022 has been raised to $20,500, up from a limit of $19,500 imposed in 2019 and 2020. The new cap applies to 401(k), 403(b), most 457 plans, and the federal Thrift Savings Plan.

However, if a taxpayer or their spouse is covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. The phase-out ranges have also been increased. Here are the 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.

The phase-out ranges are different for those making contributions to a Roth IRA:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to $129,000 to $144,000 (up from $125,000 to $140,000)
  • For married couples filing jointly the Roth IRA 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 the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Saver’s Credit

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $68,000 for married couples filing jointly (up from $66,000), $51,000 for heads of household (up from $49,500), and $34,000 for singles and married individuals filing separately (up from $33,000).

The maximum Saver’s Credit of $2,000 for joint filers and $1,000 for others is capped at 50%, 20% or 10% of contributions, depending on adjusted gross income (AGI). For 2022 it fully phases out at AGIs over $34,000 for single filers, $51,000 for heads of household, and $68,000 for married couples filing jointly.

Other Updated Limits and Phase Outs

  • The amount individuals can contribute to their SIMPLE retirement accounts is increased to $14,000 (up from $13,500).
  • The limit on annual contributions to an IRA remains the same: $6,000. The IRA “catch-up” additional contribution limit for individuals aged 50 and over remains $1,000.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,500. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan who are 50 and older can contribute up to $27,000, starting in 2022. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans remains unchanged at $3,000. It is important that you manage your retirement contributions carefully to maximize the benefits you will ultimately receive, while minimizing the tax impact. For additional information and assistance please contact Gray, Gray & Gray at (781) 407-0300.

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