Numerous Tax Limits Affecting Businesses Have Increased for 2022
The start of 2022 also brings yearly adjustments from the Internal Revenue Service (IRS) to more than 60 tax provisions that adjust annually for inflation. These adjustments include not only individual income tax rates and deductions but also many employer-provided benefits. Here is a rundown of a few that may be important to you and your business.
Social Security Tax
Each year, the federal government sets a limit on the amount of earnings subject to Social Security tax. In 2022, the amount of an employee’s earnings that is subject to Social Security tax is capped at $147,000 (up from $142,800 in 2021).
- Standard business mileage rate, per mile: 58.5 cents (up from 56 cents in 2021)
- Section 179 expensing:
- Limit: $1.08 million (up from $1.05 million in 2021)
- Phaseout: $2.7 million (up from $2.62 million)
- Income-based phase-out for certain limits on the Sec. 199A qualified business income deduction begins at:
- Married filing jointly: $340,100 (up from $329,800 in 2021)
- Single filers: $170,050 (up from $164,900)
In 2022 and 2021, the deduction for eligible business-related food and beverage expenses provided by a restaurant is 100% (up from 50% in 2020).
- Employee contributions to 401(k) plans: $20,500 (up from $19,500 in 2021)
- Catch-up contributions to 401(k) plans: $6,500 (unchanged)
- Employee contributions to SIMPLEs: $14,000 (up from $13,500)
- Catch-up contributions to SIMPLEs: $3,000 (unchanged)
- Combined employer/employee contributions to defined contribution plans: $61,000 (up from $58,000)
- Maximum compensation used to determine contributions: $305,000 (up from $290,000)
- Annual limit for defined benefit plans: $245,000 (up from $230,000)
- Compensation defining a highly compensated employee: $135,000 (up from $130,000)
- Compensation defining a “key” employee: $200,000 (up from $185,000)
Other Employee Benefits
- Qualified transportation fringe-benefits employee income exclusion: $280 per month (up from $270 per month)
- Health Savings Account contributions:
- Individual coverage: $3,650 (up from $3,600)
- Family coverage: $7,300 (up from $7,200)
- Catch-up contribution: $1,000 (unchanged)
- Health care Flexible Spending Account contributions: $2,850 (up from $2,750)
These are only some of the tax limits that may affect your business and additional rules may apply. Contact us if you have questions.