Individual Federal Income Tax Updates for 2022

The recent spike in inflation in 2021 has resulted in the IRS posting some changes regarding Individual Federal Taxes for the coming year of 2022. We’ve grouped the IRS’s changes by subject for your review.

Standard Deduction

The overwhelming majority of taxpayers now use the Standard Deduction, that has been increased as follows:

Married Couples: $25,900, plus $1,400 for each spouse age 65 or older
Singles: $12,950 or $14,700 if over 65
Head of Household: $19,400 plus $1,750 if 65 or older

Income tax rates

While the rates have not changed, the tax brackets are wider to reflect inflation.

37% for individual single taxpayers with incomes greater than $539,900 ($647,850 for married couples filing jointly).
35% for incomes over $215,950 ($431,900 for married couples filing jointly)
32% for incomes over $170,050 ($340,100 for married couples filing jointly)
24% for incomes over $89,075 ($178,150 for married couples filing jointly)
22% for incomes over $41,775 ($83,550 for married couples filing jointly)
12% for incomes over $10,275 ($20,550 for married couples filing jointly)
10% for incomes of single individuals with incomes of $10,275 or less ($20,550 for married couples filing jointly)

Social Security Payroll Tax

The Social Security wage base for 2022 has been increased to $147,000. Both employer and employee will pay 6.2% for Social Security, and 1.45% for Medicare. There is a surcharge of 0.9% on wages and self-employment income in excess of $200,000 for singles and $250,000 for couples. The surcharge is paid by employee only.

Retirement Contributions

The maximum contribution for 401(k) or 403(b) retirement plans has increased to $20,500, with an extra $6,500 available for those who are 50 or older in 2022.

There are no changes to contribution limits for Traditional IRA accounts or Roth IRA accounts. The maximum amount you can contribute to a Traditional IRA or Roth IRA or 2022 remain $6,000 for those younger than age 50. If you are over 50, you can add an extra $1,000 per year as a "catch-up" contribution, for a total maximum IRA contribution of $7,000. As with previous years, you must have earnings from work to contribute to an IRA.

Required Minimum Distributions (RMDs)

The IRS has updated its tables used for RMDs and average life expectancy had increased. The new tables reflect longer life spans, and result in marginally lower distribution rates.

Charity

Allowances for cash donations of $300 per person, or $600 per couple in addition to the standard deduction have been discontinued for 2022.

Annual Gift Exclusion

The annual exclusion for gifts increases to $16,000 for calendar year 2022, up from $15,000 for calendar year 2021.

We have highlighted a few changes that have a broad application, however, there may be other changes that may apply directly to your situation. If you have questions about any other aspect of the Federal Tax Rates, please contact us or your tax preparer.

The commentary is informational in nature and not intended to imply a specific strategy or course of action. Investment advice and recommendations are only provided according to each individual’s personal circumstances. Chancellor Wealth Management is an investment advisor firm registered pursuant to the laws of the state of Georgia. The firm is also registered to conduct business in the states of South Carolina and Texas. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright © 2021 Chancellor Wealth Management, All rights reserved.