Payroll Tax Rates & Changes

Following is a list of scheduled limitation adjustments and tax provision changes effective 2022. As additional changes are released, we will update this information. It is important to be familiar with changes in payroll taxes each year to accurately process payroll.

• The limitation on the annual benefit under a defined benefit plan increased from $230,000 to $245,000.
• The compensation limit for defined-contribution plans increased from $58,000 to $61,000.
• The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans and the federal government’s Thrift Savings Plan increased from $19,500 to $20,500.
• The annual compensation limit for qualified plans increased from $290,000 to $305,000. The salary threshold used in the definition of a “key employee” in a top-heavy plan increased to $200,000.
• The salary threshold used in the general definition of a highly compensated employee increased to $135,000.

• The dollar limitation for employees 50 and older who participate in an employer plan other than a 401(k) or 408(p) SIMPLE remains unchanged at  $6,500. The dollar limitation for employees 50 and older who participate in 401(k) or 408(p) SIMPLE remains unchanged at $3,000.
• The annual compensation limit for eligible participants in certain governmental plans increased from $430,000 to $450,000. The compensation amount regarding simple employee pensions (SEPSs) is $650.
• The limitation for SIMPLE retirement accounts increased from $13,500 to $14,000.

• Adoption Credit: The adoption tax credit is $14,890.
• Cafeteria Plans: The dollar limitation on voluntary employee salary reductions for contributions to health flexible spending arrangements increased to $2,850.
• Qualified Transportation Fringe Benefit: The monthly limitation for the qualified transportation fringe benefit and for qualified parking increased to $280.
• Standard Deductions: The standard deduction for heads of household is $19,400, $12,950 for singles and married couples filing separate returns, and $25,900 for married couples filing jointly.
• Exempt Amount of Wages, Salary, and Other Income: The dollar amount used to apply to tax levies for years when the personal exemption amount is $4,400. This elimination of the personal exception was a provision in the Tax Cuts and Jobs Act.
• Foreign Earned Income Exclusion: The foreign earned income exclusion amount increased to $112,000.
• Medical Savings Accounts: The annual deductible for self-only coverage in a medical savings account increases to not less than $2,450, and not more than $3,700. The maximum out-of-pocket expense amount is $4,950. The annual deductible for family coverage in a medical savings account is $4,950 and not more than $7,400. The out-of-pocket expense amount is $9,050.
• Qualified Small Employer Health Reimbursement Arrangement: To qualify, the total amount of the payments and reimbursements for any year cannot exceed $5,450 ($11,050 for family coverage).