Forum Discussion
How to Account for Inflation
First of all, there's no attachment, so it's hard to visualize how you've laid this out, to say nothing of how you incorporate the various "ins and outs," how many "ins" or "outs" there are.
That said, I'm attaching one way to do it. You'll notice that I created a table off to the side, a table in which you can make different assumptions for different types of "ins and outs." You should always use a table like this, rather than doing what's called "hard coding," where you would put your 3% assumption into each formula where it applied. Using a table allows you to test assumptions, change scenarios, without revising the formulas; you just change an assumption.
This is a very simple example. You can enhance it to your heart's content.
Let me know if you have questions or need further clarification.
Mathetes – I reviewed your Federal Tax workbook. Very impressive! Nicely documented and put together.
Since I am looking annually way out into the future, I’ve done a tax table for each year, estimating the annual change to the brackets. The 2025 and 2026 brackets are posted online, so for 2027, I just used the 2026 increase (3.98% - 2.28%, depending on bracket). I did the same for Standard Deduction and Medicare.
I’ve attached my tax table worksheet for 2025 for your review. I hard-coded the income max for each bracket because there only seven brackets – easy to do. And because I am single, I don’t bother with the other filing statuses, though it is a good idea and I may copy yours in the future.
Cell D2 actually pulls my Federal Taxable Income from another worksheet, but here, I've just hard-coded it.
I added 2025 brackets to your named range “BracketCutoffs”. For Single, your Input & Output worksheet calculates the same taxes due as my 2025 tax table worksheet. I am very glad to get your confirmation.
I couldn’t figure out an elegant formula to handle the 37% tax bracket, so I just set it at $2M. If you have a more elegant formula to handle a taxable income of “$640,601 and higher”, let me know (though I see that you set yours at $20M+).
My tax table shows how much of my taxable income goes into each bracket and the tax for that bracket’s income. Then at the bottom it shows total tax.
It also shows how much “wiggle room” I have in whichever is my highest tax bracket because for Roth conversions, I may wish to the income in my top bracket. In this case, since I’m already in the 24% bracket, I may wish to convert enough to add $4,481 of taxable income to take me right to the top of the 24% bracket.
Thanks for the educational exchange.
PS – on your Input & Output worksheet, I think cell G5 should read “...C23...”, not “...C32...”.
Thanks for your kind words regarding my spreadsheet. It was fun to create.
Yours is very simple and educational in its own right. I like that you show how much of one's final tax is actually taxed at the LOWER rate. And, yes, I'd encourage you to design it for other filing statuses as well, partly for the fun of making it more flexible, partly so you can share it with family and friends.
From how people often talk about desperately trying to avoid getting into a higher bracket, it would seem that many people have the mistaken notion that once they get into, say, the 32% bracket, all of a sudden everything is taxed at 32%, when in fact it's only whatever exceeds the lower end of the new "higher" bracket. So if you're $10 into the 32% bracket, you've really only added $3.20 to the tax bill; your take home is still $6.80 than it would have been had you been one cent below that cutoff. Your display dispels the false notion.
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You wrote: If you have a more elegant formula to handle a taxable income of “$640,601 and higher”, let me know (though I see that you set yours at $20M+).
Look more closely at mine; you'll see that the simple "rule" I followed was putting the relevant year into the first four digits of that number. So, yes, it's $20M, but the next two digits are 21, 22, etc for tax years 2021, 2022, etc.
You wrote: PS – on your Input & Output worksheet, I think cell G5 should read “...C23...”, not “...C32...”.
Thanks for catching that, though it actually should be C33, the cell that has the formula.