Question

For Tax Year 2019, amounts are indexed using the Chained Consumer Price Index for All Urban Consumers ("chained CPI"). What impact will this have on 2019 tax returns?

Answer 1

2019 Tax Impact of Chained Consumer Price Index for All Urban Consumers

The impact is very minimal with just a reduction of $150 from 2018's $24,550. However, the chained Consumer Price Index (chained CPI) is more progressive than the fixed weighted CPI, as it does not use a fixed bracket of goods.

Step-by-step explanation:

The chained Consumer Price Index indexes consumer spending, taxes, and Social Security benefits to the rate of inflation. Considered an alternative measurement to the Consumer Price Index (CPI), the Chain-weighted CPI factors in the product substitutions by consumers and other changes in their spending habits, which are unlike the fixed-weighted bracket of goods used by the ordinary CPI.