The New Tax Law – 2018 – How it affects frum families

For children under 17 you are better off with the extra $1,000 credit than the $4,050 exemption for any income up to $315,000/year for married filing joint. The extra child tax credits for the kids 17 and under, in addition to the lower rates and the new higher standard deductions, probably mean the overwhelming majority of large frum families are much better off overall even with the loss of the exemptions for children 17 and older.

And then there’s the new 529 accounts for Yeshiva tuition.

LC: The K-12 529 Account *did* make the final bill that’s on Pres. Trump’s desk today. The only last minute change to the 529 (that the Senate made, causing a re-vote in the House) was that it removed the home-schooling coverage from the 529; the K-12 coverage remains part of the new law’s final provisions.

GHD: The AMT was changed in the new law to affect much fewer taxpayers than in the old law. SALT’s $10k allowance was modified in the final bill Congress passed to cover both income taxes *and* property taxes. $10k should be sufficient to cover most middle class homeowners. Additionally, they save in the form of lower taxes from the other provisions of the law that lowers other parts of their taxes owed.

When you count the average family size you’re counting families that have X number of children but are still having more after you count the current average. Like that you might count an average of 5 or 6. If you only count families that have completed having children, the American Orthodox average is closer to 7 or 8. (Note that Chareidim are 75% of American Orthodoxy and Chasidim are approximately a majority, or close to it, of Chareidim. Visit Williamsburg or Lakewood one day and count the number of children per family. It isn’t hard to find those with 10.)

Approximately 75% comes from Pew Research 2013.

iac: 1) They’ll save from the lower tax brackets, higher deduction, 529s, and the other provisions lowering other areas of taxes, even if they lose a part of the property tax deduction and 2) they should blame their high-tax state for their high-tax state property tax; the feds aren’t setting their property taxes.

Regarding KJ, they aren’t one of the lowest income per family; not even close. The reason they qualify for Medicaid and are classified as one of the highest poverty rates is because that is based on family size and not just on family income. So even if he’s earning $80,000/year, since he has 11 children he’s counted as in poverty and gets Medicaid despite earning $80k. But his income is above average based on salary/earnings. And since KJ has large family sides k’h, even though they have above average income per family, they have below average per person. And that gets them counted as impovershed.

In New York State anyone can claim a state income tax deduction of up to $10,000 per year for Yeshiva education tuition costs paid from a 529 Account. As a result of the new federal tax law, starting in January 2018 it makes sense for everyone with Yeshiva K-12 tuition charges to pay it from a 529 Account. This will allow the first $10,000 of tuition every year to be deducted from your New York State income taxes. You can put the money into a 529 Account and then immediately use it to pay tuition. That’s all you need to do to get the State income tax deduction.

Some other states have much more generous 529 allowances than the NYS $10,000. In those states this tax benefit for Yeshiva tuition costs will be even larger. Illinois, for instance, allows deductions for $20,000 in contributions a year per beneficiary (in other words – per child) to 529 plans, while Pennsylvania allows $28,000. Colorado, New Mexico, South Carolina and West Virginia have broader tax benefits: all 529 contributions are fully deductible, so participants’ entire private school tuition could be free of state tax.

I think this is important information for all yeshiva tuition paying parents to know. This all starts in 10 days.

The tax bill was signed into law today by President Trump.

Poverty guidelines and entitlement benefits are based on family size. If KJ had an average of 3.14 people per family, like the American national average was in 2016, rather than an average family size of 11 (two parents and nine children k’h), then KJ would be considered to have an above average income and below average poverty rate (and wouldn’t qualify for as much Medicaid and food stamps.) It is only because of their large family sizes that results in their being counted as impovershed and qualifying for benefits. Their per family income, in terms of actual dollars per year, is not below the national average per household.