Don’t cry over the price of milk spilling upwards. It could actually mean that you pay lower taxes.
MoneyTalksNews explains how while inflation raises the prices on everything from milk to gas to gumdrops, it’s also going to cause the IRS to change things in your favor. Every year they adjust the tax brackets for inflation to fight off the effects when inflation-indexed wages rise. Otherwise people might be pushed into a higher, more burdensome tax bracket and have to pay more taxes than they should
The tax burden could be adjusted several ways. The amount allowed for personal exemptions is predicted by tax publisher CCH to rise to $3,800 from $3,700, making it $100 less you’ll have to pay taxes on. The standard deduction is predicted to rise by $300 for married couples filing jointly and $150 for single filers. But the largest difference will be in the brackets. The first two brackets are predicted to rise by $200 and $1,050, respectively, while the top bracket could see a bump up of $9,201.
“While inflation adjustments apply to all taxpayers, those who make the most benefit the most,” writes MoneyTalksNews. “According to CCH, a married couple with taxable income of $100,000 will owe $190 less in income taxes in 2012 than 2011. A married couple with taxable income of $450,000 in 2012 would pay $732 less in taxes.”
How the Price of Milk Might Lower Your 2012 Taxes [MoneyTalksNews]