2018 Tax Reform: Navigating the Changes for 2019
With the enactment of new tax laws in 2018, you may be wondering what your tax return will look like this year. Featuring changes like an increase in the standard deduction and the elimination of, or limitations on, many itemized deductions, it's hard to know what to expect. We can help you navigate these updates so you feel confident going into your tax appointment.
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 changed in 2018.
The existing tax brackets are: 10, 12, 22, 24, 32, 35 and 37 percent. Though there are still seven brackets, the rates are lower for the majority. This means most taxpayers will see their tax rate decrease. For example, a married couple with a combined income of $150,000 has gone from a 25 percent tax rate to a 22 percent tax rate under this law.
Higher Standard Deductions
For 2018, the law nearly doubled the standard deduction to $12,000 for single filers, $18,000 for heads of household and $24,000 for joint filers. In 2019, the standard deduction increases to $12,200 for single filers, $18,350 for heads of household and $24,400 for joint filers (adjusted for inflation).
You may now have an incentive to give more to Wayne State 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). If you purchase a new home, there is now a cap on the mortgage interest for the first $750,000 of debt on your primary residence. Under this plan, if you itemize your deductions, you will be able to deduct up to $10,000 for income, sales and property taxes.
Charitable Contributions for Cash Gifts
The new law increased the adjusted gross income limitation for donations by cash, check or credit card to 60 percent. Higher net worth donors may want to consider increasing cash gifts.
What’s the Same?
You will still be able to deduct your charitable contributions if you itemize your taxes.
Long-Term Capital Gains and Dividends
The tax rates on capital gains and dividends remain the same at 0, 15 and 20 percent, depending on your specific tax bracket.
Charitable Contributions of Appreciated Property
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.
What Does This Mean for Me?
As you get older, tax season can get more complicated because you’re accumulating more assets as well as potential deductions. Make the next tax season easier on yourself by following these four tips.
- Know what you can deduct. Deduct cash, property and stock donations made to a charitable organization such as Wayne State University, if you itemize your taxes. You cannot deduct the value of any time or services spent on charitable work, but you can deduct mileage and vehicle expenses if used for charitable purposes.
- Get proper documentation. For cash contributions of any amount, be sure to have a bank record or written acknowledgment of your contribution from the charitable organization. (For any single contribution worth $250 or more, you must obtain a written acknowledgment from the charitable organization. For property valued at more than $5,000, you must have a qualified appraisal.)
- Transfer records to personal budgeting software such as Mint, YNAB or Quicken. Digitize your information from financial transactions to stay organized. Some apps also integrate with tax software to make preparation much easier.
- Involve the professionals. A professional tax advisor is the best person for advice on specific tax issues. Feel free to contact the Office of Planned Giving for answers to any questions you might have about contributing to Wayne State.
If you have questions, please contact the Office of Planned Giving at (313) 577-6481 or PlannedGifts@wayne.edu. We’d be happy to help and can discuss how you can include your support of Wayne State University as part of your plans.