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Margarita Spivak

2022 Retirement Plan Contribution and Gift Tax Limits Announced

Margarita Spivak

December 21st, 2021 | Written by

The IRS recently announced 2022 retirement plan contribution and gift tax limits. These included some limits that will be increasing and some that will be remaining the same as the 2021 limits. See the changes in retirement plan and gift tax limits below.

Retirement Plan Highlights

The following limits are increasing for 2022:

  • Maximum contributions for 401(k), 403(b) and eligible 457(b) plans increases to $20,500
  • The annual addition limit for defined contribution plans increases to $61,000
  • The annual compensation limit increases to $305,000

The following limits will remain the same for 2022:

  • The catch-up contribution limits for 401(k) plans remains at $6,500
  • The IRA contribution limit remains at $6,000
  • The IRA catch-up remains at $1,000

Why this matters

Increased retirement plan contribution limits are an opportunity to maximize your retirement savings. Your financial advisor can show you how increasing your annual contribution will impact your retirement savings over the next 5, 10, 15, 20 years, or more! We can also help you decide if contributing to a Roth or a traditional retirement plan is better for your unique financial situation.

Gift Tax Highlights

  • The annual gift tax exclusion is increased to $16,000 per recipient for 2022 (up from $15,000 in 2021). The limit for married couples will be $32,000 for 2022.
  • The lifetime gift tax exemption is increased to $12.06 million per individual (up from $11.7 million in 2021). The limit for married couples will be $24.12 million for 2022.

Why this matters

The annual gift tax exclusion has been $15,000 for four years. The Internal Revenue Service has increased this limit to $16,000 due to inflation. The new limit allows you to transfer more money to your heirs tax-free; however, if you make gifts over the annual gift tax exclusion, you will have to file a gift tax return the following year.

It is also important to note that the lifetime gift tax exemption is set to be cut in half at the start of 2026. In an earlier version of the Build Back Better Act, a provision was included that would have cut the lifetime exemption in 2023, however, it was dropped from the legislation in November. It is not currently clear whether that provision will be back in the final version of the plan. Because of this, we are encouraging clients who are interested in using the higher lifetime gift tax exemption to talk to their financial advisor to plan their gifts before changes to the law are implemented.

We’re All In

If you have any questions or would like to discuss your retirement savings, Roth conversions, gifting plans, the tax impact of these changes, or anything else, please do not hesitate to reach out to your financial advisor or leave us a comment below.

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    This information is intended for educational purposes only. It is not intended to provide any investment advice or provide the basis for any investment decisions. You should consult your financial advisor prior to making any decision based on any specific information contained herein.

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    The Prosperity Consulting Group registered as a Registered Investment Advisor (RIA) in 2005. We have with a passion for providing clients with objective investment advice and wealth management solutions. Our purpose, coupled with our fiduciary commitment, is essential in helping clients achieve their financial goals. Our firm is dedicated to providing unparalleled financial planning and investment advice to individuals, families, businesses and institutions. We have identified key areas that are critical and integral to a client’s financial success. These planning areas encompass: Investment Planning & Management Retirement Planning Estate Planning Tax Planning Business Planning Insurance Planning Income Protection & Asset Preservation Education Planning 401(k) Planning
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