2018 Tax Laws: What You Need to Know

2018 tax law graphicYou may be wondering how the 2018 tax law impacts you. For many taxpayers, it creates an opportunity for increased disposable income.

Here are the main takeaways of the new law:

What's New?

Federal Income Tax Brackets

Whether you're a single filer or a married person who files jointly, separately or as head of household, your tax bracket will be new in 2018.

The new law lowers rates for most brackets. A married couple with a combined income of $150,000, for example, will go from a 25 percent tax rate to 22 percent under the new law.

Rate Individuals Married Filing Jointly Heads of Households
10% $0 $0 $0
12% $9,525 $19,050 $13,600
22% $38,700 $77,400 $51,800
24% $82,500 $165,000 $82,500
32% $157,500 $315,000 $157,500
35% $200,000 $400,000 $200,000
37% $500,000 $600,000 $500,000

If you're in a lower bracket this year and paying less taxes, you have the opportunity to help families with an even larger charitable gift.

Higher Standard Deductions

The new law nearly doubles the standard deduction to $12,000 for single filers, $18,000 for heads of household and $24,000 for joint filers. You may be less likely to itemize on your taxes and use the income tax charitable deduction.

Therefore, you may want to consider making charitable gifts on alternate years, exceeding the standard deduction one year and itemizing the next. This is called "bunching" your charitable deductions.

Itemized Deductions

If you elect to itemize this year, your total state and local tax deductions — or SALT — will now be capped at $10,000. These include state and local income or sales taxes, real estate taxes and personal property taxes.

Mortgage interest is not included in the cap, but it's also changed. Only the first $750,000 is deductible for mortgages taken out after December 14, 2017.

Also, interest paid on home equity loans is no longer deductible, unless per the Internal Revenue Service, the loan is "used to buy, build or substantially improve the taxpayer's home that secures the loan."

Increased AGI For Charitable Gifts Made in Cash

The new law increases your adjusted gross income (AGI) charitable deduction limit from 50 to 60 percent. This applies only to donations made by cash, check or credit card.

What's the Same?

Charitable Deductions

If you're itemizing, charitable contributions are still deductible.

Long-Term Capital Gains and Dividends

The tax rates on long-term capital gains and qualified dividends remain the same at 0, 15 and 20 percent, depending on your tax bracket.

Qualified Dividend Tax Rate Single Filing Status Married Filing Jointly Head of Household Married Filing Separately
0% $0-$38,600 $0-$77,200 $0-$51,700 $0-$38,600
15% $38,601-$425,800 $77,201-$479,000 $51,701-$452,400 $38,601-$239,500
20% $425,801 or more $479,001 or more $452,401 or more $239,501 or more

Charitable Contributions of Appreciated Property

The limitation on charitable gifts of long-term appreciated property to public charities remains at 30 percent of your adjusted gross income. You still can carry over any excess for up to five additional years.

What Does All This Mean for Me?

The lower tax brackets may mean some are in a better position to help others this year. Here are three smart ways that you can help bring comfort to our families.

  1. Donate appreciated property.
    A gift of appreciated property is a great way to benefit the causes you care about. You may qualify for an income tax charitable deduction and eliminate capital gains tax.
  2. Name the house as a beneficiary of retirement plan accounts.
    Assets in your IRA, 401(k) or other qualified retirement plan accounts remain subject to income tax when distributed to your heirs. If you name the House as a beneficiary of all or part of your plan, your gift will pass to us tax-free.
  3. Give from your IRA (if you are 70½ or older).
    This gift helps you fulfill your required minimum distribution and is tax-free up to $100,000. No itemization is necessary! Read More.

Need Help?

If you have questions, please contact Debbie Kamens at 858-598-2415 or dkamens@rmhcsd.org. We'd be happy to help and can discuss how you can include your support of Ronald McDonald House Charities of San Diego as part of your plans.

Grantor Charitable Lead Annuity Trust

Provides income payments to a qualified charitable organization for a period of years, the lives of one or more individuals or a combination of the two; after which, trust assets are paid to the donor of the trust.

A power of attorney form that transfers ownership of stock.

Securities such as stock that are in certificate (paper) form.

Investments that have increased in value since the time of their purchase.

Testamentary means bequeathed through one's will.

A charitable bequest is one or two sentences in your will or living trust that leave to Ronald McDonald House Charities of San Diego a specific item, an amount of money, a gift contingent upon certain events or a percentage of your estate.

an individual or organization designated to receive benefits or funds under a will or other contract, such as an insurance policy, trust or retirement plan

I give [insert amount, percentage of the estate, or 'the rest and remainder of my estate'] to Ronald McDonald House Charities of San Diego, Inc.

Federal Tax ID #95-3251490

able to be changed or cancelled

A revocable living trust is set up during your lifetime and can be revoked at any time before death. They allow assets held in the trust to pass directly to beneficiaries without probate court proceedings and can also reduce federal estate taxes.

cannot be changed or cancelled

tax on gifts generally paid by the person making the gift rather than the recipient

the original value of an asset, such as stock, before its appreciation or depreciation

the growth in value of an asset like stock or real estate since the original purchase

the price a willing buyer and willing seller can agree on

The person receiving the gift annuity payments.

the part of an estate left after debts, taxes and specific bequests have been paid

a written and properly witnessed legal change to a will

the person named in a will to manage the estate, collect the property, pay any debt, and distribute property according to the will

A donor-advised fund is an account that you set up but which is managed by a nonprofit organization. You contribute to the account, which grows tax-free. You can recommend how much (and how often) you want to distribute money from that fund to the House or other charities. You cannot direct the gifts.

An endowed gift can create a new endowment or add to an existing endowment. The principal of the endowment is invested and a portion of the principal’s earnings are used each year to support our mission.

Tax on the growth in value of an asset—such as real estate or stock—since its original purchase.

Securities, real estate or any other property having a fair market value greater than its original purchase price.

Real estate can be a personal residence, vacation home, timeshare property, farm, commercial property or undeveloped land.

A charitable remainder trust (CRT) provides income to you, as the donor of the CRT, or to other named individuals, and does so each year for life or for a period not exceeding 20 years. The remainder of the assets go to your chosen charity.

You give assets to a trust that pays our organization set payments for a number of years, which you choose. The longer the length of time, the better the potential tax savings to you. When the term is up, the remaining trust assets go to you, your family or other beneficiaries you select. This is an excellent way to transfer property to family members at a minimal cost.

You fund this type of trust with cash or appreciated assets—and may qualify for a federal income tax charitable deduction when you itemize. You can also make additional gifts; each one also qualifies for a tax deduction. The trust pays you, each year, a variable amount based on a fixed percentage of the fair market value of the trust assets. When the trust terminates, the remaining principal goes to the House as a lump sum.

You fund this trust with cash or appreciated assets—and may qualify for a federal income tax charitable deduction when you itemize. Each year the trust pays you or another named individual the same dollar amount you choose at the start. When the trust terminates, the remaining principal goes to the House as a lump sum.

A beneficiary designation clearly identifies how specific assets will be distributed after your death.

A charitable gift annuity involves a simple contract between you and the House where you agree to make a gift to the House and we, in return, agree to pay you (and someone else, if you choose) a fixed amount each year for the rest of your life.