Many tax limits that affect businesses are annually indexed for inflation, and a number of them have increased for 2022. Here’s a rundown of some key tax breaks for small businesses.

Social Security Tax

The amount of an employee’s earnings that is subject to Social Security tax is capped for 2022 at $147,000 (up from $142,800 in 2021).

Deductions

• Standard 2022 mileage rate for business, 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).

Accounting Rules for meals and entertainment

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).

Retirement plans

• 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 SIMPLE IRA plans for small businesses: $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).
• Reasonable 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.