Andrea’s Tip of the Month | November 2021


AB Tip November 2021

New 401k Contribution and Gifting Limits for 2022… and don’t forget your favorite charities this season!

Increased 401k Contribution Limits

On November 4th, the IRS announced that the 401k contribution limit will increase in 2022 by $1,000, up to $20,500. For those over 50, the catch-up contribution remains at $6500, making the maximum contribution $27,000. If you contribute to a 401k, log in to your account and ensure you’ll reach this new contribution level for 2022. If you are maximizing your contributions, give yourself a pat on the back. Only 8% of Americans are maximizing contributions to their 401ks!

While you are logged in, note if you are contributing to the pre-tax or Roth portion of your account. For many, it makes sense to contribute to the pre-tax portion, but for some, contributing to the Roth portion may make sense. Lastly, note how your account is invested. Is it well-diversified? Is the risk level appropriate for your current circumstances?

Increased Gift Tax Annual Exclusion Amount

If you make annual gifts to individuals such as children and grandchildren that limit has also gone up for 2022.  Every taxpayer can give away $16,000 (up from $15,000) with no Federal gift tax consequences.

Note:  This means that couples could give away $32,000.  For those who have a taxable estate (or who may have a taxable estate if the lifetime exclusion is ever reduced), a series of $16,000 gifts to multiple people can add up. Annual gifting may give you the opportunity to start a conversation with your family about financial goals and values.

Charitable Contributions

As we consider what we are most thankful for this holiday season, don’t forget the charities that are meaningful to you. Even if you don’t itemize, Congress now allows married tax-payers to deduct $600 of charitable gifts from their annual income ($300 for individuals). You may already give over the $600 amount, but many don’t. This is another opportunity for conversation around the holidays. Having conversations about charitable giving will give you the opportunity to share your charitable giving values AND help charities with increased gifts.