Changes are now in place from the IRS that impact income tax brackets and standard deductions. The adjustments were made in October to prevent what the IRS calls, bracket creep.
The IRS makes the annual adjustments because some people get pushed into a higher income tax bracket while their purchasing power remains unchanged because of prices for goods are much higher.
In this case, the adjustments recently made are much more significant because in much of 2022 inflation was about three-times the pre-pandemic rates. In June of last year inflation was 9.1% on average. November’s rate was slightly lower at 7.1%.
So the changes the IRS made for the tax bracket shifts is an average of what happened all last year and totals about 7%.
While the top tax rate will remain at 37%, the higher thresholds could end up saving money for millions of us.
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