Tax strategy for retirees

Although wage increases may have helped your income keep pace with rising costs for everything from food to housing and auto repairs, a bigger paycheck may also bump you into a higher marginal tax bracket, in a phenomenon called tax-bracket creep.

Tax-bracket creep happens during periods of high inflation when wages rise, pushing people into higher tax brackets.

It can result in a double hit to your wallet as the rising cost of many common consumer items crimps budgets, while your extra pay could potentially increase your tax bill.

While the federal government adjusts marginal tax brackets for inflation each year, it does not make adjustments to numerous credits, deductions, exemptions, and surcharges, which can mean your effective tax rate could go up, whether you take the standard deduction or itemize.

For example, the net investment income tax (NIIT) on capital gains, dividends, and interest income has not been adjusted since it was enacted in 2013.

It's an added 3.8% surtax on everything from home sales to interest paid on CDs and taxabl

how to minimise tax in retirement

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