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2018 Federal Inflation Adjustments

Posted by taxguru on October 25, 2017

Every year, some parts of the tax code, such as the beginning and ending points for the various personal income tax brackets, are adjusted for the change in the government’s official Consumer Price Index (CPI) as of August 31.  This is supposed to prevent “bracket creep,” where people whose income is just keeping pace with inflation are pushed into the higher percentage brackets.

Not all tax related amounts in the Tax Code adjust automatically for inflation.  There are scores of tax related figures in the Tax Code that do not ever get adjusted and have been the same for several decades, waiting for an official Act of Congress to be adjusted for the effects of inflation.

As has been the tradition, tax publishers are the first to do the calculations and release the inflation adjustments for the next year.  IRS will release their official inflation adjustments for 2018 in the next month or so, assuming those IRS employees are still around in IRS HQ.

The first such report with 2018 adjusted amounts that I have come across is this 16 page pdf from Thomson Reuters.

Projected 2018 Inflation-Adjusted Tax Brackets and Other Key Figures

As I have done in previous years, I will post links to other such reports, as I learn about them.

Update 10/25/2017:  IRS has announced their official inflation adjustment figures in the following two news releases.

IRS Announces 2018 Pension Plan Limitations; 401(k) Contribution Limit Increases to $18,500 for 2018

In 2018, Some Tax Benefits Increase Slightly Due to Inflation Adjustments, Others Unchanged

One key adjustment that I didn’t mention earlier is the fact that, after several years at $14,000, the annual Gift Tax exclusion will rise to $15,000 per donor per donee for 2018.  This exemption is only increased in $1,000 increments, so it normally takes a few years of cumulative inflation before it’s enough to trigger the $1,000 increase.

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