Law changes are one important way in which write‐off amounts and restrictions on them change each year. But another, less obvious way is adjustments to certain amounts and limits reflecting cost‐of‐living changes. Cost of‐living adjustments are pegged to the Chained Consumer Price Index for All Urban Consumers (C‐CPI‐U). Not all items subject to adjustment actually change each year, but the list of the items subject to change continues to grow.

To help you plan your taxes for the future, it's helpful to know that certain limits affecting exclusions, deductions, and credits are raised in step with increases in the cost of living (although some items may be adjusted downward if the times demand it). The following exclusions, deductions, and credits are subject to annual adjustments for inflation:

401(k) 403(b), and 457 plan elective deferrals

accelerated death benefits daily dollar amount that can be paid tax free from a life insurance policy on account of chronic illness

adoption assistance programs the maximum dollar amount and AGI phaseout range

adoption credit the maximum dollar amount and the AGI phaseout range

affordable health coverage provided by an employer and which prevents eligibility for the premium tax credit

alternative minimum tax (AMT) exemption amount

alternative minimum taxable income for the 26% rate

Archer medical savings accounts the definition of a high‐deductible plan (i.e., the range for an annual deductible) and the limit on out‐of‐pocket costs

attorney's fees recovery from the government

benefits limit for defined benefit plans the dollar limit on benefits under these plans for which contributions are figured on an actuarial basis

child tax credit the value used in determining the refundable credit

compensation on which qualified retirement plan deductions are based the amount of compensation or self‐employment income taken into account in figuring deductions for plan contributions

contribution limit for profit‐sharing and other defined contribution plans the dollar limit on deductible contributions to these plans

contribution limit for SEPs the dollar limit on deductible contributions to these plans

dollar limit for depreciation and first‐year expensing on luxury cars the maximum deduction for depreciation or first‐year expensing for cars and light trucks weighing no more than 6,000 pounds, as well as the dollar limit for heavy SUVs

earned income credit the earned income amount, the maximum amount of the credit, the AGI phaseout range, and the disqualifying investment income amount

educator deduction out‐of‐pocket costs for grades K–12

excepted benefit health reimbursement arrangement the dollar limit on reimbursements

first‐year expensing limit dollar limit on amount of equipment that can be expensed as well as the taxable income limit

flexible spending accounts for medical costs the employee salary reduction contribution limit and the carryover limit

foreign earned income exclusion the dollar amount that can be received tax free for performing services abroad

health savings accounts annual deductibles and contributions limits to HSAs for high‐deductible health plans

insubstantial benefits from charities dollar limit on what constitutes insubstantial benefits (ignored when figuring charitable contribution deductions)

interest exclusion on savings bonds AGI phaseout range

interest on student loans AGI phaseout range

IRAs MAGI limit for active participants to make deductible IRA contributions

lifetime learning credit MAGI phaseout range

long‐term care premiums dollar limit on annual contributions treated as deductible medical expenses

low‐income housing credit amounts used to calculate the state housing credit ceiling

parking dollar limit on employer‐provided tax‐free parking

payments received under long‐term care policies or accelerated death benefits daily dollar limit excludable without regard to long‐term care expenses or terminal illness

premium tax credit income eligibility threshold

qualified business income deduction taxable income amounts

qualified longevity annuity contract the maximum contribution

qualified small employer health reimbursement arrangement amounts excludable

retirement savers credit MAGI limit on eligibility to claim a credit for making certain elective deferrals and IRA contributions

Roth IRAs MAGI limit on eligibility to contribute to this retirement savings plan

Social security wage base for FICA and self‐employment tax limit on income taken into account in figuring the Social Security portion of FICA and self‐employment tax

standard deduction dollar amount

standard mileage rate for business travel the cents‐per‐mile rate may be increased or decreased

standard mileage rate for medical the cents‐per‐mile rate may be increased or decreased

transportation fringe benefits dollar limit on excludable free parking, monthly transit passes, and van pooling

Not all of the dollar amounts covered in this book are indexed annually for inflation. There are certain dollar amounts set by law or the IRS that are not adjusted for inflation. In doing tax planning for future years, you can rely on these fixed amounts (unless Congress decides to change them). The following items are not adjusted annually:

achievement awards an exclusion for receiving these awards is limited to $1,600 for qualified awards and $400 for nonqualified awards.

business gifts these are deductible only up to $25 per recipient each year.

business travel substantiation no receipts are needed for travel costs under $75 (except for lodging).

capital losses up to $3,000 ($1,500 if married filing separately) of capital losses in excess of capital gains for the year can be used to offset ordinary income.

charitable contribution substantiation rules the dollar thresholds for certain types of substantiation are fixed by law. Donations of $250 or more require a written acknowledgment from the charity. Donations of cars or other vehicles valued over $500 require a special acknowledgment. Appraisals are needed for donations of property valued over $5,000. Additional appraisal rules apply to donations of art valued at $20,000 or more.

charitable distributions to charity the exclusion for transfers from traditional IRAs to a public charity (qualified charitable distributions) by those age 70½ and older is capped at $100,000 annually.

Coverdell education savings accounts (ESAs) the maximum annual contribution is capped at $2,000 per year for an eligible beneficiary, and the MAGI limit for making a full contribution is up to $95,000 for singles and $120,000 for joint filers.

cruise ship travel for business the deduction is limited to $2,000.

dependent care assistance employer assistance is tax free up to $5,000 annually (other than in 2021, when the limit was increased by a special law to $10,500). If your employer offers a dependent care flexible spending account, you can contribute up to $5,000 annually from your compensation; the amount contributed is not taxed to you.

dependent care credit the maximum amount of eligible expenses taken into account in figuring the credit is $3,000 for one child and $6,000 for two or more children (other than in 2021, when it was increased by a special law to $8,000 and $16,000, respectively).

disaster losses there is a $100 reduction in the amount of each disaster loss ($500 for a net disaster loss if the net disaster loss rule is extended for 2022); it applies per event (not per damaged or destroyed).

education credits the income limits on eligibility for the American opportunity credit and lifetime learning credit are fixed.

foreign tax credit simplified reporting this is restricted to a foreign tax credit of no more than $300 ($600 on a joint return).

gift loans the below‐market loan rules do not apply to gift loans up to $10,000 per recipient.

health savings account additional contribution limit those who are age 55 and older by year‐end can add $1,000 to their applicable contribution limit for the year.

home sale exclusion up to $250,000 of gain ($500,000 on a joint return) on the sale of a principal residence can be excluded if certain conditions are met.

IRA catchup contributions the additional annual contribution by those age 50 or older is $1,000.

IRA early distribution penalty exception for first‐time homebuyers there is a $10,000 cap on penalty‐free IRA distributions.

loans from qualified retirement plans the maximum loan is 50% of your vested account balance or $50,000, whichever is less.

lodging for medical treatment lodging to receive outpatient care is deductible up to $50 per night ($100 per night if you are accompanying a sick child).

mortgage insurance the deduction for mortgage insurance is limited for those with adjusted gross income (AGI) below set limits. The full deduction applies for AGI up to $100,000 ($50,000 for married persons filing separately).

retirement plan reporting the threshold below which annual reporting of qualified retirement plans to the Department of Labor is $250,000.

Olympic medals the adjusted gross income limit for claiming the exclusion for the medals is limited to $1 million ($500,000 for married persons filing separately).

performing artists the conditions for such individuals to deduct their job expenses from gross income rather than as an itemized deduction are fixed. Adjusted gross income from all sources (not just performing) cannot exceed $16,000.

recovering attorney's fees and administrative costs from the government there is a net worth cap on individuals seeking a recovery. The cap is $2 million.

rental losses you can deduct up to $25,000 of rental losses each year if you actively participate in the rental activity and your adjusted gross income is no more than $100,000 (special rules apply to married persons filing separately).

reporting payments to independent contractors only payments of $600 or more to an independent contractor must be reported to the IRS.

section 1244 losses you can treat losses on certain small business stock as ordinary (rather than capital) losses up to $50,000 ($100,000 on a joint return).

standard mileage rate for charitable driving the rate is 14¢ per mile.

student exchange program if you host an exchange student in your home under an agreement with a charitable organization, you can deduct $50 per month as a charitable contribution.

student loan interest the maximum annual deduction is $2,500.