Tax Code Updates For Retirees
Are you thinking of finishing your career’s final chapter in the near future? Or maybe you’re already retired and interested in extending your savings. Whatever the case, we know that taking advantage of potential tax breaks is more important than ever.
An unfortunate fact of the matter is that many individuals miss out on opportunities to save money when they file their taxes. Don’t let this be you. This blog will help you understand what changes in tax legislation happened in 2022 that could affect your retirement.
The IRS updated the table to calculate the required minimum distributions to account for longer life expectancies. In other words, expect your RMD to be a bit smaller so your savings can be stretched further.
If you’re still saving for retirement, there’s good news for you. Many essential dollar amounts for retirement plans and IRAs are higher. For example, the maximum contribution limits for 401(k), 403(b), and 457 jumped from $19,500 to $20,500 for 2022, while people born before 1973 can once again put in $6,500 more as a "catch-up" contribution. The 2022 cap on contributions to SIMPLE IRAs is $14,000 (up from $13,500 in 2021), plus an extra $3,000 for people aged 50 and up.
While the contribution limit for traditional and Roth IRAs remains at $6,000, plus $1,000 as a catch-up contribution for individuals aged 50 and up, the income limits for Roth IRA contributions increased at adjusted growth incomes of $204,000 to $214,000 for couples and $129,000 to $144,000 for singles.
Lower-income individuals may also be able to take advantage of the “saver’s credit.” This tax break can be worth up to $1,000 ($2,000 for joint filers), but you must contribute to a retirement account, and your adjusted gross income must be below the following thresholds:
- $34,000 of adjusted gross income (AGI) for single filers and married people filing a separate return.
- $68,000 for married couples filing jointly.
- $51,000 for head-of-household filers.
What other tax breaks can I take advantage of?
As a retiree or someone looking to retire soon, there are several ways you can stretch your savings through the use of the tax breaks available to you. When it comes to your finances, you don’t want to overlook these potential tax breaks.
- Remember your standard deduction. When you turn 65, the IRS offers you a birthday present in the form of a larger standard deduction.
- Your spouse can continue contributing to your IRA, even if you’re retired. That means even though you’re retired, money can continue to be added to your IRA. If your spouse is still working, they can contribute up to $7,000 a year to a traditional or Roth IRA you own.
- If you like to keep yourself busy and become self-employed following your retirement, you can deduct the premiums you pay for Medicare Part B and Part D, plus the cost of supplemental Medicare policies or the price of a Medicare Advantage plan. This deduction is available whether or not you itemize and is not subject to the 7.5%-of-AGI test that applies to itemized medical expenses.
How can Taxfyle help?
We understand that taxes are complicated. So why not take the stress out of them by handing the work to a Tax Professional? Taxfyle connects individuals like you with one of our talented Tax Pros across the country who can handle your specific tax needs.
Don’t wait to file your taxes this year, have a Pro file them for you.