Each year, the Internal Revenue Service (IRS) makes rounded inflationary adjustments to the federal income tax brackets and the income phase-outs for various tax deductions and tax credits.
Although IRS Publication 17, Your Federal Income Tax, and IRS Publication 970, Tax Benefits for Education, won’t be updated until 2022, the IRS usually publishes the updated numbers in a Revenue Procedure in late October or early November.
Tax Brackets
The tax-rate tables include seven tax brackets, with the following income ranges.
The Kiddie Tax thresholds are increased to $1,150 and $2,300.
The refundable portion of the Child Tax Credit has increased to $1,500.
The maximum Earned Income Tax Credit is $560 for no children, $3,733 for one child, $6,164 for two children and $6,935 for three or more children. Starting in 2022, the earned income tax credit is not allowed if the aggregate amount of investment income is more than $10,300.
The tax rates for estates and trusts have four brackets.
The standard deduction has increased slightly.
The Alternative Minimum Tax (AMT) exemption is $75,900 for single filers, $118,100 for married filing jointly, $59,050 for married filing separately and $26,500 for estates and trusts.
The income limit for certain capital gains tax rates has increased.
Income Phaseouts
There are several different income phaseouts for education tax benefits.
The Tuition and Fees Deduction has been permanently repealed.
The income phaseouts for the American Opportunity Tax Credit and Lifetime Learning Tax Credit are not adjusted for inflation.
The income phaseouts for the Coverdell Education Savings Accounts are not adjusted for inflation.
Income Exclusions
Annual Gift Tax Exclusion: $16,000
Lifetime Estate and Gift Tax Exclusion: $12.06 million
Foreign Income Exclusion: $112,000
Retirement Plan Contribution Limits
Roth IRA contribution limits remain at $6,000, with an additional $1,000 catch-up contribution limit for workers age 50 and older. The income phaseout on contributions is $129,000 to $144,000 (single and head of household), $204,000 to $214,000 (married filing jointly) and $0 to $10,000 (married filing separately).
The contribution limits for 401(k), 403(b) and 457 plans increased to $20,050, with an additional $6,500 catch-up contribution limit for workers age 50 and older. The catch-up contribution limit has not changed.
The contribution limit for SIMPLE retirement plans increased to $14,000.
The income limit for the Saver's Credit is $34,000 (single and married filing separately), $68,000 (married filing jointly) and $51,000 (head of household).