We tend to be most aware of our specific income, charitable contributions, family gifts and retirement savings or withdrawals as we gather our information for last year’s tax return preparation. This awareness, perhaps accompanied by an upcoming meeting with our tax professionals, provides a great opportunity for strategic planning for the year ahead.
Here are highlights of the 2022 key financial figures that, depending on your stage of life, may impact your planning this year:
No significant income tax reform was passed last year. The seven income and three capital gains tax brackets have been slightly expanded to adjust for inflation
Some retirement plan contribution limits have increased, notably, the new limit for elective deferral plans such as 401(k)s, has increased to $20,500 ($27,000 for those over age 50). Traditional and Roth IRA funding limits remain unchanged at $6,000 ($7,000 for those over age 50)
The annual gift tax exclusion increased to $16,000 for individuals and $32,000 for couples
The federal transfer (gift, estate and generation-skipping) tax exclusion has increased to $12,060,000 per person. This exemption is scheduled to be reduced by 50% in 2026
The standard deduction increased to $25,900 for married filing jointly and $12,950 for individuals. Taxpayers aged 65 or older and those with vision loss are eligible for an additional $1,400 (married) or $1,750 (single) deduction
The Social Security wage base increased to $147,000 and the Social Security benefits have a cost-of-living adjustment of 5.9% for 2022
The qualified charitable distribution (QCD) remains in place, allowing IRA owners who are 70 ½ or older to donate up to $100,000 annually directly from their IRA to qualifying public charities
For additional information, please find the 2022 Annual Limits Guide from the College for Financial Planning®, which is a helpful and concise reference for a variety of tax and wealth planning figures.
The likelihood of meaningful tax reform passing in the near term appears to have declined but remains worth monitoring. We encourage you to stay in contact with your portfolio manager and tax advisor for updates on how any changes might affect your plans.
Ferguson Wellman and West Bearing have planning resources and forecasting tools to help you address your short- and long-term goals as well as important questions regarding retirement, gifting and lifestyle. We are pleased to provide our complimentary Wealth Horizon™ planning service to all our clients. Your portfolio manager can initiate this process with our wealth management team for you, and can collaborate with your accountant, estate planning attorney and other professionals, as appropriate.
Ferguson Wellman, Octavia Group and West Bearing do not provide tax, legal, insurance or medical advice. This material has been prepared for general educational and informational purposes only and not as a substitute for qualified counsel. You should consult qualified professionals to understand how this information may, or may not, apply specifically to you.