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Under the new tax reform law, many people who itemed in 2017 will no longer itemize in 2018 since they won’t have enough deductions due to the sugnificant increase in the standard deduction. Their taxes go down, but they no longer will need (be able) to itemize. In blue states, these will typically be middle class people who rent, or property owners with only one fully employed spouse.
Will this impact on charitable donations in the frum community, to perhaps raise them in the last week of 2017 (last chance before the new law takes effect), but to decrease them after Jan. 1, 2018 (since for those no longer itemizing, there is no tax incentive to make charitable contribution).
Most people don’t make cash charitable contributions because they are tax deductible. They still could cost you 70 cents in the dollar. Yes, there is a push to maximize deductions for most middle income taxpayers in 2017>>>charitable deductions, prepay property taxes, etc.
In some cases, it is not the loss of itemization (I’ll still qualify) but the reduction in deductions for property and state income taxes that will cause a huge tax bite and lower my charitable contributions in 2018.
The increase in the standard deduction is pretty meaningless for Mrs. CTL and myself, we have no dependents. But we’ll lose the deduction for more than $40,000 in state and local taxes we have now, added to other changes our tax bill on the same income (and as a self employed professional I can control my taxable earnings) will increase more than $20,000. That is $20,000 that will not be given to tzedakah in 2018. We have reached the stage in life that we give away almost all of our expendable income. As a family law/trust attorney, I was able to set up and fund trusts for my progeny and old age and it is the community who benefits from my current work.
I have mentioned before that an average 4 BR colonial on 3/4 acre minimum zoning in our middle class residential town has an average tax bill of $13K. Since passage of the tax bill, asking prices for such houses have declined approx 6% (Mrs. CTL is a realtor and these figures are from the CT MLS for current listings in our town). Few people usually list their homes for sale this time of year, but new listings are up as well.
CT- not sure what you mean by this:
The increase in the standard deduction is pretty meaningless for Mrs. CTL and myself, we have no dependents.if you have no dependents then this standard deduction is more meaningful, not less. You get a 30k deduction instead of half that with no loss to the exemptions not being included.
Unless you mean that it’s meaningless because you choose to itemize. Which, thanks to the garbage Obamacare that messed over everyone except you and your family (may they live many, many long healthy years) the medical bills are finally exceeding my exemptions.
{sarcasm – except that brocha for your family}One of the advantages of living “In town” is the property taxes in NYC are lower than the suburbs
CT Lawyer states it accurately and objectively (as usual). Hard to say how the impact on the frum community will vary much from the national trend. Fewer will be itemizing and most likely will have some adverse near term affects next year on many Mosdos.
@Syaglchochma
My comment about the increase in the personal exemptions being meaningless to me as we have no dependents was in reaction to a post on the parallel thread to this where it was stated a typical frum family with 8 children would do better with the increased personal exemptions than they did itemizing.I live in a mature community. It grew as a suburb during the white flight of the late 1960s and early 70s. Very few frum families are left with children of the age who are still dependents on parents’ tax returns. Our last married in August and 2017 will be the final return where we and the in-laws can claim the children on our returns.
The talk at shul this Shabbos kiddush was how many of us will make our Florida homes our main abode. Establish homestead status to lower property tax in Fla, be guaranteed no state income tax under the FL Constitution, sell our CT homes and just come north for a month for the Yomin Noraim (as my parents did for 25 years.I’ve been looking at the local zoning and tax codes and I could turn our compound into 5 unit condominium development with amenities with each unit sold having a property tax under 8K. It is a serious consideration.
ZD,
That assumes that the amount of income you make is such that NYC income tax plus the real estate tax is less than the real estate tax paid in suburbs.
I would guess for many in the suburbs that may not be the case.
CTLawyer – I hear what you are saying, and I would probably cry at the thought of you selling the compound I have grown to love, but i am still not sure you answered the question. The doubling of the standard deduction is MORE meaningful to those without exemptions as they can now deduct more, not less. I will have to lose out on thousands in exemptions but empty nesters come out ahead.
I may or may not be an accountant, but I don’t think the standard deduction has anything to do with dependent exemptions. You can take the standard deduction regardless of whether or not you are taking dependent exemptions.
Meno – it doesn’t “have anything to do with” it, but if I used to subtract (in rough numbers) 12k for standard deduction and then 40k for exemptions i subtracted 52k off the top of my income. Now I will subtract 24k but not the 40k so it will only give me a 24k reduction in taxable income. An empty nester was deducting 12k with 8k in exemptions and will now deduct 12k, which means they come out ahead in that regard. don’t see how the doubling could make an empty nester not gain something by the doubling or how he meant that it was meaningless.
I can get you a calculator if that would help….“I may or may not be an accountant, but I don’t think the standard deduction has anything to do with dependent exemptions. You can take the standard deduction regardless of whether or not you are taking dependent exemptions.”
The dependent exemptions are eliminated in the new tax code. The logic Congress used to eliminate them was because they doubled the standard deductions and doubled the child tax credit.
akuperman:
I don’t think Jews will change giving tzedaka much. Even those who used to get a special charitable deduction and will not since they switched to the standard deduction, are also paying lower taxes overall since the tax tables themselves are lowered in addition to the higher standard deduction they’re going to get.
Since they aren’t paying more in taxes under the new tax code, and are probably even paying less taxes without taking a charitable deduction, there’s no reason for Jews to give less tzedaka.
The dependent exemptions are eliminated in the new tax code.
Aha. Didn’t catch that part.
How much is the increased Child Tax Credit?
Child Tax Credit went from $1000 to $2000 per child. Good for children under 17 years old. Exemptions were good even for adult dependent children until married.
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