Take Advantage- Changes Are Likely Coming in 2018
As most of us know, the House and Senate have passed versions of a new tax reform to create a new Tax Code that will go into effect January 1st 2018, should it get passed. There are various discrepancies between the 2 versions of the bill and they are now in a committee to see if the House and Senate can agree on one bill for it to be passed into law. There are many matters that can have massive implications on people’s personal tax situation .
Here are a few points that a colleague of mine alerted me to that can possibly be pre-planned for, in the short time left until January 1st (Thanks R' Kronglas!):
1. Deductions for charitable donations will not be removed, HOWEVER, the standard deduction will be raised from ≈$12k to ≈$24k. Additionally, many of the deductions that are currently an “itemized deduction” are being removed. This will result in many moderate income earners ("upper middle class") to no longer itemize their deductions and take the “standard deduction” instead, as that will be more beneficial to them. For them, it is beneficial (from a tax perspective) to give a lot of charity in the next 2 weeks and getting the charity deduction rather than giving in 2018 and receiving no tax benefit from the charity deductions.
2. The tax brackets/rates are changing for personal income taxes. Under the House’s proposal, a married filing joint person will be paying only 12% on income under $90,000. That is significantly lower than the current tax of 15-25% of monies between ≈19k-90k. Based on this, it may be beneficial for many people to give charity this year, in 2017, as they can capitalize on the higher tax rates and therefore higher tax savings, as opposed to giving next year when the rates and savings will be lower.
3. The business tax rates are also being decreased. This has/is prompting businesses to give more charity in 2017 to maximize their tax benefit.
4. Unrelated to tax reform, as the stock market has done very well this year, donating stock is a great way to receive a maximum tax-deduction as well as avoid paying Capital gains taxes.
BOTTOM LINE: It is wise talk to your tax adviser to see if any or all of these factors would benefit you. You may be very surprised. Of course, there are many worthy organizations to give to, and we hope the Kollel is one of them!
Here's a link for secure, tax deductible donations: DONATE