The Treasury Department has announced inflation-adjusted figures for retirement account savings for 2022. The chart below compares retirement plan limits for 2021 versus the new limits for 2022.
Your MAGI may reduce or even eliminate your ability to take advantage of IRAs. Fortunately, IRA-related MAGI phaseout range limits all will increase for 2022:
Traditional IRAs. MAGI phaseout ranges apply to the deductibility of contributions if a taxpayer (or his or her spouse) participates in an employer-sponsored retirement plan:
- For married taxpayers filing jointly, the phaseout range is specific to each spouse based on whether he or she is a participant in an employer-sponsored plan:
- For a spouse who participates, the 2022 phaseout range limits increase by $4,000, to $109,000–$129,000.
- For a spouse who doesn’t participate, the 2022 phaseout range limits increase by $6,000, to $204,000–$214,000.
- For single and head-of-household taxpayers participating in an employer-sponsored plan, the 2022 phaseout range limits increase by $2,000, to $68,000–$78,000.
Taxpayers with MAGIs in the applicable range can deduct a partial contribution; those with MAGIs exceeding the applicable range can’t deduct any IRA contribution.
But a taxpayer whose deduction is reduced or eliminated can make nondeductible traditional IRA contributions. The $6,000 contribution limit (plus $1,000 catch-up if applicable and reduced by any Roth IRA contributions) still applies. Nondeductible traditional IRA contributions may be beneficial if your MAGI is also too high for you to contribute (or fully contribute) to a Roth IRA.
Roth IRAs. Whether you participate in an employer-sponsored plan doesn’t affect your ability to contribute to a Roth IRA, but MAGI limits may reduce or eliminate your ability to contribute:
• For married taxpayers filing jointly, the 2022 phaseout range limits increase by $6,000, to $204,000–$214,000.
• For single and head-of-household taxpayers, the 2022 phaseout range limits increase by $4,000, to $129,000–$144,000.
You can make a partial contribution if your MAGI falls within the applicable range, but no contribution if it exceeds the top of the range.
As shown the in the chart above, there are a lot of changes that will help your employees save more. HR Departments should plan to adjust their systems for next year and to inform employees about the new limits in year-end open enrollment materials. If you have any questions, please contact your VonLehman advisor.
