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Clarity Capital Management Notables - November 24th 2021 Thumbnail

Clarity Capital Management Notables - November 24th 2021

*NEW* Clarity Capital Management Notables Audio Version CLICK HERE Listen to Eric & Ryan discuss the new tax proposal covered below

During this holiday week, we had a couple quick updates for you. As you might have heard, the IRS has put out next year’s the annual inflation adjusted tax brackets, contribution limits, and other important financial planning figures for us to all think about. This is the time of year that our clients are thinking about their employer’s open enrollment. Feel free to use the numbers below as you think about how much you’d like to contribute to any employer sponsored plans:  

  • 401(k) Plans – The contribution limit is raised to $20,500 in 2022, up from $19,500 in 2021
    • The catch-up provision for savers 50 and older remains at an additional $6,500
    • The new amounts apply to 401(k), 403(b), most 457, and Thrift Savings Plans
  • IRA’s – Unfortunately, the contribution limit was not increased for 2022 and remains at $6,000, with a $1,000 catch-up for those over 50
  • ROTH IRA phaseouts has been increased, rising to between $129,000 to $144,000 for single filers and between $204,000 to $214,000 for married filing jointly
  • SIMPLE IRA Plans – The contribution limit has been raised to $14,000 from $13,500, with a $3,000 catch-up for those over 50
  • Health Savings Accounts (HSA’s) – The contribution limit has been raised to $3,650 for individuals, $7,300 for families, with a $1,000 catch-up for those over age 55

We also have the 2022 inflation adjusted tax brackets:The above numbers are all adjusted based on the IRS and congressional guidelines created when bills in congress are set. Speaking of congress, you may have also heard that the House of Representatives have passed the Build Back Better Plan. After going through the long process of seeing how much the bill would cost using the Congressional Budget Office (CBO), the partisan bill was voted on and passed. As expected, if the bill becomes law, we’ll see some big changes that impact a lot of our clients. Here are some of the highlights that we’ve discussed in prior articles: 

  • The end of the Back-Door Roth IRA and Mega Back-Door Roth Contribution
  • An increase to the SALT (State and Local Tax) cap deduction from $10,000 to $80,000 (through 2030)
  • Extension of the enhanced Child-Tax Credit through 2022
  • Programs related to childcare and universal pre-K
  • An increase to tax brackets at the higher income brackets and a minimum corporate tax rate
  • 4 weeks of paid family and medical leave

Keep in mind that the bill still needs to make its way through the Senate and has not yet become law. We’ve been asked a few times about what has changed, and the answer is: nothing. Nothing is final until we have President Biden’s signature on it. In the coming weeks, we will expect that we see some additional changes made to the bill to satisfy the more moderate Senate democrats before it is passed.Finally, and most importantly, we wish you and your families the happiest of Thanksgivings. The holidays are a great time to relax and reflect. We hope you have ample time to do both. 2021, just like 2020, has been a bit of a whirlwind for many…especially here at Clarity Capital Management. We have been growing quickly and have been happy to expand our services with the addition of Eric. We couldn’t be happier with the new relationships that we have created and the support we have had from our clients that have been with us from the start. We have the best clients in the business, and we are so thankful of that!