Before you flip the calendar to 2022, there are some important changes to the tax code that you should be aware of to help with your tax and retirement planning for next year.
First, here are the new federal income tax brackets for 2022:
| Rate | For Unmarried Individuals | For Married Individuals Filing Joint Returns | For Heads of Households |
| 10% | $0 to $10,275 | $0 to $20,550 | $0 to $14,650 |
| 12% | $10,275 to $41,775 | $20,550 to $83,550 | $14,650 to $55,900 |
| 22% | $41,775 to $89,075 | $83,550 to $178,150 | $55,900 to $89,050 |
| 24% | $89,075 to $170,050 | $178,150 to $340,100 | $89,050 to $170,050 |
| 32% | $170,050 to $215,950 | $340,100 to $431,900 | $170,050 to $215,950 |
| 35% | $215,950 to $539,900 | $431,900 to $647,850 | $215,950 to $539,900 |
| 37% | $539,900 or more | $647,850 or more | $539,900 or more |
The standard deduction has increased a little bit for 2022:
| Filing Status | Deduction Amount |
| Single | $12,950 |
| Married Filing Jointly | $25,900 |
| Head of Household | $19,400 |
The standard deduction is useful to know at the beginning of the year because if you think your itemized deductions will be less than the standard deduction amount, then you don’t have to worry about retaining receipts, charitable contribution details, etc.
The long-term capital gains tax rates for 2022 are:
| For Unmarried Individuals, Taxable Income Over | For Married Individuals Filing Joint Returns, Taxable Income Over | For Heads of Households, Taxable Income Over | |
| 0% | $0 | $0 | $0 |
| 15% | $41,675 | $83,350 | $55,800 |
| 20% | $459,750 | $517,200 | $488,500 |
These are the rates that you apply to any realized gains on assets that you sold that were held for over one year. For assets sold that were held less than one year, the gains are taxed at your normal income tax rate.
For example, if you’re married and have $100,000 in taxable income, your long-term capital gains tax rate would be 15%. For comparison, your short-term capital gains tax rate would be 22%.
Contribution limits for retirement plans have changed as well for 2022. Here are the maximum employee contributions in 2022 for the most common retirement plans:
| 401k | 403b | SIMPLE IRA | |
| Max Contribution | $20,500 | $20,500 | $14,000 |
| Catch up amount if over age 50 in 2022 | $6,500 | $6,500 | $3,000 |
Please let me know if you have any questions.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
