The changes are part of a cost-of-living adjustment. Individuals will be able to contribute up to $20,500 to their employer-sponsored plans, up from $19,500 for 2021 and 2020. However, the changes do not apply to individual retirement accounts (IRA).
The contribution limit for employees also extends to most 457 plans, and contributions to the federal government's Thrift Savings Plan are increasing to $20,500, up from $19,500. There will also be changes to traditional and Roth IRAs, but the contribution limits are not increasing. The limit for 2022 stays at $6,000 -- $7,000 for those aged 50 or older. There is also no increase in catch-up contributions for people over 50.
Taxpayers will be able to make contributions based on specific income levels. Other conditions may also apply. For example, if the taxpayer or the taxpayer's spouse was covered by a retirement plan at work during the year, then the allowable IRA deduction may be reduced or phased out until it is eliminated, depending on filing status and income.
New income ranges
Here are the new income ranges for IRA contributions:
For single taxpayers covered by a workplace retirement plan, the phase-out range is going up by $2,000 to a maximum of $78,000 in annual income. 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 taxpayers contributing to an IRA who is not covered by a workplace retirement plan but 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.
For a married person filing separately who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Roth IRA income limits will also rise
People contributing to a Roth IRA will be able to earn more next year. The income phase-out range is now $129,000 to $144,000 for singles and heads of household, up from $125,000 to $140,000.
Married couples filing jointly will be able to earn $204,000 to $214,000, up from $198,000 to $208,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment.
The Saver’s Credit program, used primarily by low- and moderate-income workers, will increase the income limit to $68,000 for married couples filing jointly, up from $66,000. Other income limits are $51,000 for heads of household, up from $49,500; and $34,000 for singles and married individuals filing separately, up from $33,000.