Most of the federal tax figures get adjusted each year for inflation. That’s something to be happy about. It means the amount of money you can earn before you hit the next tax bracket is larger. The standard deduction increases, as do various other tax benefits.
A year ago, with inflation nearly nonexistent, figures adjusted by a mere 1%. New figures for 2022 reflect recent price increases, upping tax figures by about 3% on average.
As always, rounding rules can make these changes somewhat uneven. This year’s adjustment wasn’t enough to change the IRA contribution limit, which remains at $6,000 ($7,000 for those age 50 or older) for 2022. Yet the elective deferral limit — this is the limit for 401k and similar plans — gets a $1,000 boost. Savers can stash up to $20,500 ($27,000 if age 50 or older) in these retirement accounts in 2022.
One other adjustment you may wish to note is a $1,000 hike in the annual gift tax exclusion. For 2022, you can give me up to $16,000 without having to file a gift tax return. Gifts at this maximum amount will be gratefully acknowledged.
Tax brackets for 2022, and various other adjusted figures, are available in our Reference Room.