How does Income Lab incorporate inflation into tax calculations
Discover how Income Lab factors inflation into tax calculations for a more accurate financial analysis.
Last published on: December 19, 2025
Each year, certain tax amounts and thresholds are adjusted for inflation. Since future inflation adjustments are not known ahead of time, it is important to project these values in a plan using the plan's assumed inflation rate(s) to properly project tax calculations in the future.
For tax values that do not adjust for inflation over time (i.e., values that are flat/fixed in nominal terms), the plan's inflation assumptions are used to adjust the real (i.e., today's dollars) amounts of those tax values. When a tax value is not adjusted for inflation over time, it has the effect of increasing the real, inflation-adjusted amount that is taxed in the future compared to today. For example, thresholds for taxability of Social Security are not adjusted for inflation. That means that, over time, more and more Social Security benefits will be subject to taxation simply through the effects of inflation.
The table below shows which Federal values are adjusted for inflation and which are not. These differences are reflected in Income Lab software and plan projections.
| Adjusted for Inflation | Not Adjusted for Inflation |
| Ordinary and LTCG bracket thresholds | Social Security taxability thresholds |
| Standard deductions | Net investment income tax (NIIT) thresholds |
| QCD limit | Thresholds for extra ACA Medicare tax on earnings |
| LTC premium deduction caps | “Senior Bonus” amounts and thresholds |
| OASDI tax max earnings cap | SALT deduction cap (2025-2029)* |
| Medicare premium amounts & thresholds (IRMAA) |
* SALT deduction caps return to $10,000 in 2030, but between 2025 and 2029 increase by set amounts. These exact amounts are reflected in Income Lab.
Each year, tax values are updated in the Income Lab software on January 1 to reflect the new year's actual values.