2018 Tax Reform

Whether you’re a single filer or a married person who files jointly, separately or as head of household, you will likely fall into a new tax bracket.

The new law maintains seven tax brackets, but lowers rates for most brackets. The new brackets are: 10, 12, 22, 24, 32, 35 and 37 percent. Most taxpayers will see their tax rate decrease. 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.

You may be in a lower bracket this year and pay less taxes. You now have an opportunity to give more to the charitable organizations you care about, such as Xavier College Prep or one of its programs.

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.

You now have an incentive to give more to Xavier College Prep or one of its programs in one particular year over another to exceed the standard deduction and itemize your deductions.

If you elect to itemize this year, your deductions may look a little different (though charitable deductions remain under the new law). Under the new plan, you will be able to deduct up to a total of $10,000 for state and local taxes.

If you purchase a new home, there is now a cap on the mortgage interest deduction for the first $750,000 of debt on newly purchased homes.

The new law increases the limitation of 50 percent of your adjusted gross income (AGI) for donations by cash, check or credit card up to 60 percent. Higher net worth donors may want to consider increasing cash gifts.

The threshold for triggering an estate, gift or generation-skipping tax was raised to $11.18 million per person ($22.36 million for a married couple). Only an estimated 0.1 percent of estates will be subject to estate tax under the new law. (By comparison, the rates in 2017 were $5.49 million for individuals and $10.98 million for married couples.)

If you have a high net worth, you may no longer anticipate being subject to estate tax and have an incentive to make larger gifts during your lifetime to obtain an income tax charitable deduction instead of waiting until after your lifetime.

You will still be able to deduct your charitable contributions if you itemize your taxes.

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

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

With many markets experiencing strong growth, consider a gift of appreciated property to a nonprofit like Xavier College Prep. You may qualify for an income tax charitable deduction and eliminate capital gains tax.

Assets in IRA, 401(k) or other qualified plan accounts remain subject to income tax when distributed to your heirs. If you name Xavier as a beneficiary of all or part of your plan, your gift will pass to Xavier tax-free.

Regardless of whether you itemize your taxes, this gift helps you fulfill your required minimum distribution and is not considered taxable income.