The federal income tax brackets are a fickle thing. Between political meddling and inflation, something changes almost every year. Of course, knowing about these tax changes in advance, makes it easier for you to plan your taxes and hopefully save money.
There are two things that can happen to the tax brackets every year: the tax rates may change and the tax brackets can be adjusted for inflation.
When the tax rates change, you can blame Congress for messing with the tax laws (unless it’s in your favor).
Otherwise, the federal tax brackets are indexed to inflation. This prevents inflation creep from pushing you into a higher tax bracket. The IRS looks at the CPI data (Consumer Price Index) over a twelve month period. If inflation is high enough, the IRS will make adjustments to the income limits for each bracket. Continue Reading…