Bracket Creep

DEFINITION of 'Bracket Creep'

A situation where inflation pushes income into higher tax brackets. The result is an increase in income taxes but no increase in real purchasing power.

BREAKING DOWN 'Bracket Creep'

This is a problem during periods of high inflation as income tax codes typically take a longer time to change.

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RELATED FAQS
  1. If I have 5 tax years before I must take an RMD, how much tax benefit will it be ...

    My effective tax bracket for 2016 is 1.28% due to being retired with only pension and SS income.  ... Read Answer >>
  2. Are tax brackets adjusted for inflation?

    Learn about U.S. tax brackets and how the U.S. Internal Revenue Service (IRS) makes annual inflation-based adjustments for ... Read Answer >>
  3. What is the difference between income tax and capital gains tax?

  4. How can I find out which income tax bracket I am in?

    Find out how to determine your federal income tax bracket and calculate how much you will owe in federal taxes with online ... Read Answer >>
  5. Can moving to a higher tax bracket cause me to have a lower net income?

    Many people think that when their income increases by enough to push them into a higher tax bracket, their overall take-home ... Read Answer >>
  6. What is the income breakdown for the effective tax rate?

    Read about the effective tax rate, how the marginal income tax brackets affect it and how the denominator in its formula ... Read Answer >>
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