There weren’t many major tax law changes for 2022, but there’s a good chance you may be affected by them. In this video, Brendan discusses the two significant tax law changes (2022), including an increase in the gift tax limit and changes to 401k/403b plan contribution limits.
Topics Discussed:
Gift tax changes - increase for 2022
Elective deferral retirement plan contribution increases for 2022: 401(k), 403(b), SARSEP, 457
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Transcript:
Hi, and welcome to another edition of coffee with Brendon, today's may be the shortest one that I ever do, just to point out a couple of the changes to the tax laws in 2022. You know, like every year, you know, some of the tax tables change, and some of the ranges of where you can actually, you know, qualify for lower tax brackets and things like that, they change, but there weren't really too many material changes between 2021 and 2022, other than the two that I'm going to show you today. So let's jump right on in.
So I'm going to start sharing my screen here. And we'll start with gifting. So one of the biggest things that I think a lot of my clients don't fully appreciate is, how much money can you gift without having to one report it to the IRS, and to pay any kind of tax on it. So when it comes to gifting, right now, the way that it is, is this, they you can it's called the annual gift tax exclusion. In 2021, you could give, you could gift $15,000 to any person alive. So literally, if you decided that you want to give it away your entire amount of wealth, you could do it in $15,000 increments. And if you're married, you could actually do it in $30,000 increments. Well, fast forward to 2021 22, excuse me. And now that's actually gone up to 16,000. So now husband and wife can give away $32,000 To as many people as they want, they do not need to notify the IRS, nor do you pay tax on it for making the gift, or the recipient pay any tax on receiving the gift. So again, great, great way to start knocking away your wealth, especially if you're in a state tax state like Massachusetts, where if you pass away with more than a million dollars or $2 million dollars, if you've done the correct legal work, then, you know, this is one way to start chipping away at that overall net worth so that you don't pay any tax when you pass away. So that's pretty much that, you know, in terms of gifting, we could get into that. You know, and then that could be a whole other coffee with Brendon conversation, but suffice it to say, no gift tax return that you have to file, no income tax that you need to pay, whether you're the donor, the person that's giving the gift, or the recipient.
Then let's shift gears to, to IRA contributions and 401k contributions. So let's go through this. And if we look at some of these, some of the more more popular ones like traditional IRA, Roth IRA, spousal Ira guardians, nothing's changed. So you can still make the $6,000 contributions as long as you're not making too too much money, and another $1,000 If you are over the age of 50. If we go down, not too too much has changed until we get to this one. And this is the important one for a 401 ks 457 plans 403 B's, this has increased, so it's increased by $1,000. So instead of being able to contribute $19,500, in 2021, you can now contribute $20,500 The salary the deferrals have or excuse me, the ketchup provisions, which allow you to put more money in after the age of 50 have gone have stayed the same. So 60 560 500.
So long story short, last year, you could contribute a total of 26,000. Now you can contribute a total of 27,000. If you're over the age of 50, if you're not quite 50, it's this, it's this 20,500. So again, that is pretty short and sweet one today, you know, so not too too much to report, other than those two really important things. So for people who are still working and contributing to a 401k and they want to max it out, make sure that you make those changes. You know, a lot of people mistakenly think that if they simply tell their employer that they want to contribute the maximum that that means that they'll automatically adjust every time the IRS adjusts. That's not necessarily all is the case. So definitely speak with your HR department, if you do want to max out your 401 k's and then from a gifting standpoint, you know, still there's still a lot of people that think that the maximum you can give away is 10,000 When in reality as of 2022, it's actually $16,000 per person. So hopefully, hopefully this was helpful, and we'll talk to you next time. Take care