As you probably know, contributing to a retirement plan and certain other types of accounts can not only help you prepare for the future; these contributions are tax deductible and can lower your overall income tax liability for the year. That’s why it can be so important to keep up with contribution limits, which can change from year to year. Contribute the maximum, and you’re planning for the future while saving as much as possible on your taxes.
For the 2022 year, the IRS has announced the following changes to contribution limits.
For your qualified retirement plan, such as a 401(k) or 403(b): The contribution limit has been raised to $20,500 this year. By contributing all the way up to the limit, you save that amount for retirement while also reducing your taxable income by the same amount.
For your health savings account (HSA): The contribution limit has grown to $3,650 for those with individual health insurance coverage, or $7,300 for those with family coverage. An HSA allows you to set aside pre-tax dollars to be used for healthcare expenses if you’re enrolled in a high-deductible healthcare plan.
And if you don’t use your HSA funds in any particular year, the money rolls over to the following year. In fact, you can keep rolling over those funds all the way into retirement, if you’re so lucky that you don’t incur serious out-of-pocket healthcare costs. Then the money can be used to cover qualified medical expenses such as Medicare premiums and copayments. In this way, an HSA actually functions as another way to save for retirement.
Not all contribution limits were raised, however. Traditional and Roth IRA contributions hold steady at $6,000 per year.
For more information on your benefits plan, contribution limits, or how to maximize the tax benefits, call our office and we’ll be happy to help.
