1. Inflation Adjustments Could Shift Tax Brackets

Every year, the IRS adjusts federal income tax brackets to account for inflation. These adjustments are designed to prevent “bracket creep,” where rising incomes push taxpayers into higher brackets even if their purchasing power hasn’t increased.

For seniors, this matters in two ways:

• Social Security cost-of-living adjustments (COLA) may slightly increase income.

• Required minimum distributions (RMDs) from retirement accounts could raise taxable income.

If inflation remains elevated into 2026, tax brackets will likely increase modestly again. That could provide slight relief by allowing more income to be taxed at lower rates.

However, even small increases in taxable income can affect:

• Medicare premium brackets (IRMAA thresholds)

• Taxation of Social Security benefits

• Eligibility for certain credits

Understanding where your total income falls—not just your base retirement income—will be essential.

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