Inflation could soon push you into a higher tax bracket

Millions of Americans could be in store for higher taxes as a result of the hottest inflation in close to 40 years.  That's because of a phenomenon known as "bracket creep."

Bracket Creep happens when taxpayers are pushed into higher-income brackets even though their purchasing power is essentially unchanged due to steeper prices for most goods. 

Although the IRS adjusts federal income taxes for inflation, a recent analysis by Tax Foundation shows that 15 states fail to account for inflation when drawing brackets for taxes on wages and income.

Altogether, 22 states have at least "one major unindexed provision," which could mean higher taxes for millions of taxpayers who are already confronting the steepest inflation in decades. 

The IRS typically releases inflation adjustments for federal income taxes for the following year in October and November. 

Taxpayers are likely to see some of the biggest changes in decades as a result of stubbornly high inflation, with some estimates forecasting an increase as high as 7%.

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