Useful Income Tax and Retirement Planning Information

These laws have significantly changed the way you may want to consider your financial situation, especially retirement planning. Here is some information that you find helpful:

Useful Income Tax and Retirement Planning Information

There have been several major tax law changes over the past few years with staggered effective dates. These laws have significantly changed the way you may want to consider your financial situation, especially retirement planning. Here is some information that you find helpful:

Income Tax Rate Schedules for 2022

2022 Single Return Rate Schedule

2022 Married Filing Jointly Rate Schedule

Taxable income levels

Tax rate

Taxable income levels

Tax rate

0 to $10,275

10%

0 to $20,550

10%

$10,276 to $41,775

12%

$20,551 to $83,550

12%

$41,776 to $89,075

22%

$83,551 to $178,150

22%

$89,076 to $170,050

24%

$178,151 to $340,100

24%

$170,051 to $215,950

32%

$340,100 to $431,900

32%

$215,951 to $539,900

35%

$431,901 to $647,850

35%

Over $539,900

37%

Over $647,850

37%

 

2022 Standard Deduction

Married couples filing a joint return - $25,900

Single return filers - $12,950

 

2022 Personal Exemption Amount - $0 – Personal exemptions were eliminated as of 1/1/18

2022 Taxation of Dividends and Long-Term Capital Gains

Long term capital gains and qualifying dividends receive favorable tax treatment, based on taxable income levels.

Tax rate on long term capital gains and qualifying dividends

Taxable income levels for those filing individual returns

Taxable income levels for those filing joint returns

0%

Up to $41,675

Up to $83,350

15%

$40,675 to $459,750

$83,350 to $517,200

20%

Over $469,750

Over $571,200

2022 Medicare Surtaxes

As part of the health care reform enacted in 2010, additional Medicare surtaxes began in 2013 for high income wage earners and high-income investors. The surtaxes apply when a single taxpayer’s Modified Adjusted Gross Income (MAGI) exceeds a threshold of $200,000 or joint return filers when their MAGI exceed $250,000.  

  • For wage earners, an additional 0.9% Medicare surtax applies to wages (including bonuses and self-employment income) above the threshold amounts.
  • For investors, an additional 3.8% Medicare surtax applies to net investment income (taxable interest, dividends, capital gains, etc.) in excess of the thresholds.

Other Significant Income Tax Changes Effective 1/1/18

  • Passthrough income deduction – Individuals can deduct 20% of qualified business income from partnerships, S corporations or a sole proprietorship. This rule can be complicated, and you may want to consult your tax advisor.
  • Mortgage interest – Interest can be deducted on up to $750,000 of on new acquisition mortgages, down from the old limit of $1 million. Beginning in 2018, no interest on home equity loans can be deducted.  
  • State and local taxes – Beginning in 2018, the limit on all state and local income, property and sales taxes is $10,000.

Estate Taxes

Year

Estate Size Where Taxation Starts

Top estate tax rate

2022

$12,060,000

40%

2023 and beyond

Indexed for inflation

40%

Regular IRA and Roth IRA Contribution Limits

For tax year

IRA contribution limit

Additional contribution limits for those age 50 and over

2022

$6,000

$1,000

401(k) Retirement Plan Contribution Limits

For tax year

401(k) deferral limit

Additional contribution limits for those age 50 and over

2022

$20,500

$6,500

Education (or Coverdell) IRAs

For 2022, the annual contribution limit is $2000 with eligibility phase out beginning at $190,000 (for married filing jointly) and $95,000 (for individual filers) of Adjusted Gross Income (some modifications apply).

Annual Gift Tax Exclusion

For 2022, gifts of $15,000 and under are not subject to gift tax.

2022 Payroll Taxes – Social Security and Medicare

2022 Employee wages subject to Social Security tax of 6.2% up to $137,700.

2022 Employee wages subject to Medicare tax of 1.45% on all wages and an additional 0.9% on wages above $200,000 for taxpayers filing single returns. For taxpayers filing joint returns, the additional 0.9% applies to wages above $250,000.

2022 Self-employment income subject to Social Security tax of 12.4% up to $147,000

2022 Self-employment income subject to Medicare tax of 2.9% on all self-employment income and an additional 0.9% on wages above $200,000 for taxpayers filing single returns. For taxpayers filing joint returns, the additional 0.9% applies to wages above $250,000.

2022 Social Security Benefits

2022 Average monthly benefit for all retired workers - $1,657.

2022 Average monthly benefit for retired couples - $2,753.

2022 Maximum monthly benefit for a worker at full retirement age - $3,345.