You 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:
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.
||Married Filing Jointly
||Heads of Households
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.
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?
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
||$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.
- 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.
- 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.
- 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.
If you have questions, please contact Debbie Kamens at 858-598-2415 or firstname.lastname@example.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.