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Inflation affects state taxes, too

November 22, 2014

The Internal Revenue Service recently released its figures on how inflation will affect many federal tax provisions in 2015.

But the cost of living also affects states. And these jurisdictions' tax departments deal with annual price increases in different ways.

Thanks to the Tax Foundation map below, you can see the various state tax approaches to inflation.

State Tax Bracket Inflation Adjustments_Tax Foundation
Click image for a larger view.

The Washington, D.C.-based tax think tank notes that:

  • 23 states fully index brackets to inflation; this number includes the nine states (each marked by an asterisk and listed in the "Notes" box in the map) with single-rate income taxes, which are by definition inflation-indexed).
  • California and Oregon partially index their brackets.
  • 19 states, along with the District of Columbia, with multiple brackets do not index at all.

When tax brackets aren't indexed for inflation, note the Tax Foundation's Scott Drenkard and Richard Borean, taxpayers can encounter bracket creep. This happens when a higher income bumps a taxpayer into the next tax bracket, even if that higher income is merely keeping pace with inflation.

Practically speaking, absent inflation adjustments many taxpayers face a tax increase without any legislation being passed.

Have you seen inflation's effects, for good or ill, on your state taxes?

You also might find these items of interest:

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The More Tax Posts tab at the top of this page will take you to, well, more tax posts. You also can search below for a tax topic. 

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TAX-SAVVY WAYS 
TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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