The Internal Revenue Service announced the annual inflation and cost-of-living adjustments for tax year 2022.

Standard Deduction

The standard deduction for married couples filing jointly for tax year 2022 rises to $25,900 up $800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,950 for 2022, up $400, and for heads of households, the standard deduction will be $19,400 for tax year 2022, up $600.

Tax Brackets

For tax year 2022, the top tax rate remains at 37%.

Alternative Minimum Tax

The Alternative Minimum Tax exemption amount for tax year 2022 is $75,900 and begins to phase out at $539,900 ($118,100 for married couples filing jointly with the exemption beginning to phase out at $1,079,800).

Earned Income Tax Credit

The 2022 maximum Earned Income Tax Credit amount is $560 for qualifying taxpayers with no children, $3,733 for one child, $6,164 for two children, and $6,935 for three or more qualifying children.

Health FSA Limitations

The dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $2,850. The carryover limit has increased to $570.

Health Savings Account Limitations

For 2022, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,450 but not more than $3,700. For self-only coverage, the maximum out-of-pocket expense amount is $4,950. For family coverage, the annual deductible is not less than $4,950, but not more than $7,400. For family coverage, the out-of-pocket expense limit is $9,050.

Lifetime Learning Credit

The modified adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is not adjusted for inflation for taxable years beginning after December 31, 2020. The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).

Estate and Gift Exemptions

Estates of decedents who die during 2022 have a basic exclusion amount of $12,060,000, up from a total of $11,700,000 for estates of decedents who died in 2021. The annual exclusion for gifts increases to $16,000 for calendar year 2022, up from $15,000 for calendar year 2021.

Retirement Contributions

The individual contribution limit for 401(k), 403(b), most 457 plans, and the federal Thrift Savings Plan has been raised to $20,500, up from $19,500 in 2021 and 2020. The catch-up contribution limit for employees aged 50 and over and remains unchanged at $6,500. Therefore, participants who are 50 and older can contribute up to $27,000 to these plans in 2022.

The amount individuals can contribute to their SIMPLE retirement accounts is increased to $14,000, up from $13,500. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans remains unchanged at $3,000.

The limit on annual contributions to an IRA remains unchanged at $6,000. The IRA catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

If the taxpayer or their spouse is covered by a retirement plan at work, the income phaseouts that apply to traditional IRA contributions has increased. For single taxpayers the phase-out range is increased to $68,000 to $78,000, up from $66,000 to $76,000. For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to $109,000 to $129,000, up from $105,000 to $125,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is increased to $129,000 to $144,000 for singles and heads of household, up from $125,000 to $140,000. For married couples filing jointly, the income phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000.

Student Loan Interest Deduction Threshold

The full $2,500 student loan interest deduction amount can be claimed by single taxpayers with MAGI of $85,000 or less, the same as 2021, and $175,000 or less for married joint filers, up $5,000 from 2021.

Educators’ Expense Deduction

The deduction for K-12 educators for out-of-pocket classroom expenses (now including PPE) is raised to $300, up from $250 in 2021.

Further details can be found in IRS Notice 2021-61 and in Revenue Procedure 2021-45.