Month: January 2022

Every year, the IRS makes changes that could affect your tax return. The year 2022 is no different.

In November 2021, the IRS announced several updates for the 2022 tax year—and these will affect the federal tax return you file in 2023. Generally, the most recent tax changes were made to account for inflation.

Tax law changes are typically viewed as a good thing because they “can help to prevent the phenomenon known as ‘bracket creep,’ where inflation pushes a taxpayer into a higher tax bracket,” NerdWallet notes.

Here’s a rundown of four critical changes in tax law that will take effect in 2022 and how they might affect your retirement savings.

1. Changes to Standard Deductions

Most taxpayers claim the standard deduction on their federal tax returns. That deduction amount is going from:

• $25,100 for 2021 to $25,900 for 2022 for married couples filing jointly.
• $12,550 for 2021 to $12,950 for 2022 for single filers and married people who file separately.
• $18,800 for 2021 to $19,400 for 2022 for heads of household.

Effect on retirement savings: The increase in the standard deduction may allow you to put away more money for the future.

2. Increases in 401(k) Contribution Limits

If you’re under 50, you’ll be allowed to contribute as much as $20,500 to a 401(k) for the 2022 tax year, up from $19,500 in 2021. If you’re 50 or older, the contribution limit for 2022 will be $27,000, up from $26,000 in 2021.

Effect on retirement savings: Raising the 401(k) contribution limit gives you a greater opportunity to put more tax-deferred dollars toward your golden years.

3. Increases in IRA Limits

The maximum amount you can contribute to an IRA remains the same in 2022: $6,000 if you’re under 50 and $7,000 if you’re 50 or older.

However, most income limits for Roth IRAs and deduction limits for traditional IRAs differ for 2022 versus 2021.

In terms of Roth IRAs, income limits have been adjusted. For example, the income limit for Roth IRA contributions in 2021 was under $198,000 for a married couple filing jointly. For 2022, the income limit for jointly filing married couples will be under $204,000.

Meanwhile, deduction limits for traditional IRAs have changed. For example, a married couple filing jointly can claim a full tax deduction up to the amount of their contribution limit if their modified adjusted gross income (AGI) is $109,000 or less in 2022. That’s up from $105,000 or less in 2021.

Effect on retirement savings: These changes in IRA contribution and deduction limits can boost the amount of money in your retirement accounts.

4. Changes in Tax Brackets

The IRS is raising the thresholds for federal tax brackets for income taxes, Investors.com reports. “That means many taxpayers with the same or even slighter higher income in 2022 vs. 2021 will still be in a lower bracket. They’ll be subject to lower tax bills,” Investors.com continues.

For instance, the top rate (37%) will apply to income over $539,900 for individuals and heads of household, $647,850 for married couples filing jointly. The 24% rate will apply to income over $89,075 for individuals and heads of household, $178,150 for married couples filing jointly.

Effect on retirement savings: It depends on whether you fall into a lower or higher federal tax bracket in 2022.

“The adjustments ensure that taxpayers are not taxed merely on inflationary gains in their incomes, but rather on their real income after adjusting for inflation,” says Garrett Watson, a senior policy analyst at the Tax Foundation.

As you plan for taxes this year, consider what you can do to prepare for next year, too. Did you feel prepared this time around? What can you do differently in the future? You may want to diversify further. Request a free Gold IRA Information Kit to learn everything you need to know about protecting your retirement savings with the power of physical gold and silver.

The post 4 Tax Law Changes to Watch in 2022 appeared first on U.S. Money Reserve.

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The post Gold Investors need to look beyond rate hikes in 2022 – State Street Global Advisors appeared first on WorldSilverNews.