Until November 2022, Holistiplan had a hard-coded inflation assumption built into the product for various items, but users can now make their own assumptions in Scenario Analysis
The very nature of tax planning years into the future requires some assumption for inflation, since marginal tax brackets go up each year. When Holistiplan first launched, we used a 2% inflation assumption to increase marginal tax brackets, the amount of the standard deduction, the foreign housing exclusion deduction amount, and a few other items.
In November 2022, we introduced a feature to allow users to enter their own inflation assumptions in Scenario Analysis. At the top of each scenario column, users will see an row titled Inflation Assumption.
The program will inflate current brackets, deduction amounts, etc. at whatever rate users enter. Users should note, however, that Holistiplan has already entered the known bracket amounts for 2023, so selecting that year should bring up the exact bracket information, regardless of any entered inflation assumption. As we learn the exact bracket amounts for future years, we will do the same.
The toggle under the Inflation Assumption box will similarly inflate the MAGI Thresholds in the Tax Report and Range Calc. By default, these values do not inflate, as in some cases (like with Medicare MAGI), the consequences of being off by one dollar can be significant, as going over a Medicare income surcharge threshold by a single dollar triggers higher costs on a per person per year basis. This is a very conservative approach, however, and some users may feel comfortable entering some value for inflation rather than keeping those MAGI thresholds at current values years into the future.
The Inflation Assumption values do not inflate any income entries, so users will not see higher wages, IRA distributions, Social Security, etc. as a result of adjusting the inflation assumption.