Charitable contributions under the new tax law

[MaryLovesPoohBear]

I am not claiming that the tax bill is the best thing ever. I am just trying to provide facts and clear up some misconceptions.

Charitable deductions have been not been eliminated. Stating that they have been eliminated because you can no longer itemize does’t mean they have been eliminated across the board.

Some of the statements that people make about the tax bill leave the impression that everyone who can no longer itemize will be penalized. Not true.

I don’t blame those who are hurt for wanting things to be different.

And I understand people not wanting to move. But there’s a price for most of our choices. I had to leave friends and family to live in some really cruddy places to earn a living.

And I had to eventually leave California where I was born and had long ties because I just couldn’t afford to live there anymore.

We moved simply to find a job. Everyone has to make choices.

 

[RobDoc]

Please stop with the political comments.

They won't be allowed in this thread either.

 

[bdcp]

If the new tax law cost your family thousands of dollars and you had to choose between paying your bills and giving to charity, what would you do? If you use to give $5000 and were in a 25% tax bracket, losing that deduction now takes $1250 out of your family budget. That's not insignificant.

Where does it show that happening? The vast majority of people are going to see a reduction in taxes. Just because you don't want to believe it doesn't make it untrue.

I'm also not seeing political comments here.

 

[amylevan]

I was also under the impression that as it stands now only like 30% of Americans itemize. So yes, less will itemize for 2018, but I don't think that would hugely impact charitable giving with most of Americans already not deducting their giving.

 

[piccolopat]

Where does it show that happening? The vast majority of people are going to see a reduction in taxes. Just because you don't want to believe it doesn't make it untrue. I'm also not seeing political comments here.

If you read my other remarks you will see that I noted most people will see a reduction and that I was happy for them. People in high tax states like NY that usually itemize are seeing their taxes go up and that's unfortunate. Yes, the tax rate has gone down a little but the doubling of the standard deduction does not compare to the loss of our SALT deductions. Our property taxes alone are $18K here in the suburbs of NYC and our state income taxes are ridiculously high as well. Just because you don't want to believe many people are paying more under this new tax law doesn't make it untrue.

 

[tvguy]

I know the tax bill will be good for many people and I am happy for them. It is unfortunate that other people (and NOT the rich) will be hurt solely because of where they live. You say it's the cost of where one chooses to live but many people have lived in high tax states all of their lives and had full SALT deductibility. Most people don't want to move away from friends and family and so they stay in the states they grow up in. Some of them may have chosen to move to a lower tax area if the SALT tax was announced well in advance. Some may have made other budget choices if they knew this was going to hit them in 2018. We plan to move in 2-3 years but will have to pay this extra "penalty" until then. I think Congress should have found a way to keep SALT for families under $300K in income (middle class in a lot of these areas) even if it meant a corporate rate of 22% instead of 21%.

You bring up a point that has surfaced before on the DIS boards. What is middle class? The median household income for 2015 (most recent year available) in the U.S. is $57,617*
The highest is in Maryland at $76,596, the lowest state is Mississippi at $40,910. Then there is Puerto Rico at $18,810. Even in Maryland, $300,000 would be well above middle class, "rich" at nearly 4 times the median in most folks experience.


*https://www.census.gov/content/dam/Census/library/publications/2017/acs/acsbr16-02.pdf

 

[piccolopat]

You bring up a point that has surfaced before on the DIS boards. What is middle class? The median household income for 2015 (most recent year available) in the U.S. is $57,617* The highest is in Maryland at $76,596, the lowest state is Mississippi at $40,910. Then there is Puerto Rico at $18,810. Even in Maryland, $300,000 would be well above middle class, "rich" at nearly 4 times the median in most folks experience. *https://www.census.gov/content/dam/Census/library/publications/2017/acs/acsbr16-02.pdf

CNN had a nifty calculator that indicates if you are middle class by county. In mine, middle class goes up to $170,000. Fairfax County, VA is coming up as $221,316. Orange County, FL (where Orlando is) comes in at $93,350. As you can see, middle class income varies quite a bit depending on where you live. Keep in mind that the median incomes in the census link aren't the same as "middle class". The CNN calculator also doesn't show what is upper middle class for the area and that's why I used $300K in my suggestion. Here's the link to the CNN calculator. http://money.cnn.com/interactive/economy/middle-class-calculator/index.html

 

[tvguy]

CNN had a nifty calculator that indicates if you are middle class by county. In mine, middle class goes up to $170,000. Fairfax County, VA is coming up as $221,316. Orange County, FL (where Orlando is) comes in at $93,350. As you can see, middle class income varies quite a bit depending on where you live. Keep in mind that the median incomes in the census link aren't the same as "middle class". The CNN calculator also doesn't show what is upper middle class for the area and that's why I used $300K in my suggestion. Here's the link to the CNN calculator. http://money.cnn.com/interactive/economy/middle-class-calculator/index.html

That's cool, thanks. I'm $15,000 a year above middle class according to this, I'd be really rich here if I made $170,000! And I'm in what is thought of as expensive California.

 

[ajwolfe]

I'm in the group that will continue to donate without worrying about the tax deduction. We always donate clothing and such to places like Goodwill and our Rape crisis center and never even bother with asking for a receipt so it doesn't bother us.

And just for the record I'm not seeing political statements on here, not sure where that's coming from.

 

[arminnie]

Please stop with the political comments.

They won't be allowed in this thread either.

My apologies. That was not my intention at all in starting this thread. I just wanted to share some financial information that I had.

When I said I could no longer afford to live in California I meant nothing about politics. It's a factor of anything near Silicon Valley being so incredibly expensive - I truly do not think it has anything to do with who is or is not in charge politically.

 

[tvguy]

My apologies. That was not my intention at all in starting this thread. I just wanted to share some financial information that I had.

When I said I could no longer afford to live in California I meant nothing about politics. It's a factor of anything near Silicon Valley being so incredibly expensive - I truly do not think it has anything to do with who is or is not in charge politically.

Wow. I took nothing as being political in your comments. But I am in California too. Silicon Valley is expensive. Rio Linda, Redding, Red Bluff, Fresno, Bakersfield, not so expensive.

 

[piccolopat]

I'm in the group that will continue to donate without worrying about the tax deduction. We always donate clothing and such to places like Goodwill and our Rape crisis center and never even bother with asking for a receipt so it doesn't bother us. And just for the record I'm not seeing political statements on here, not sure where that's coming from.

I think there is a difference between donating food and household goods that you no longer need or want and making a cash donation. I think the cash donations may be negatively impacted by the new tax law but time will tell.

 

[georgina]

I hope not. Everyone's situation will be different, ours is unique in that my DH retired last year. I have been itemizing based solely on taxes and charitable donations. So while our income taxes will go down, property taxes will stay the same, and I expect our medical expenses to go up a lot. We may still be able to itemize, but I don't expect to change my contributions either way.

Some people seem to be forgetting that while the standard deduction will double, personal exemptions are going away, so it is not as big of a break as it seems.

 

[kydisneyfans]

Many folks have charity and the deduction built into their budget, it is part of their overall financial plan. Knowing they can get a $2,500 tax benefit for the giving allows them to give a higher percent.
If those same families switch to the standard deduction, the tax benefit is gone. With the benefit gone, the giving will drop.
Others may make up the slack as they get more money in their pockets, but I personally think non-profits will take a hit from these changes.

 

[platamama]

Some people seem to be forgetting that while the standard deduction will double, personal exemptions are going away, so it is not as big of a break as it seems.

This.

In 2018, the standard deduction was going to go up anyway:
Individual, MFS - $6,500
HH - $9,550
MFJ - $13,000

AND personal exemptions were going up to $4,150 per person.

Source https://www.irs.gov/newsroom/in-201...due-to-inflation-adjustments-others-unchanged

New standard deductions:
Individual, MFS - $12,000 (note that it would have been $10,650 anyway)
HH - $18,000 (assuming one parent with one dependent, it would have been $17,850; with two dependents $22,000)
MFJ - $24,000 (would have been $21,300)
MFJ w 1 kid - $24,000 (would have been $25,450)
MFJ w 2 kids - $24,000 (would have been $29,600)

 

[Buzzsgramma]

Thanks to all for the various explanations.....we are retired and for now still living in Illinois...

 

[cvjw]

We itemize our deductions because we give quite a bit to our church and other charities. We will continue to give at the same rate, regardless of the tax changes.

 

[MomToOne]

That's cool, thanks. I'm $15,000 a year above middle class according to this, I'd be really rich here if I made $170,000! And I'm in what is thought of as expensive California.

California varies WIDELY by county. I'm slightly above middle class in Sacramento County, in Santa Clara County with the same salary I'd be in the lower half of middle class, in San Diego county I'd be in the upper half of middle class and in Shasta County I'd be rich LOL

People just need to realize that costs of living can be crazy different in different areas, even ones that are only a few hundred miles away (that's not targeted at you specifically TVGuy, I've just seen comments the last few days that indicate some people don't get it). What seems like an insane income to you may actually be just scraping by in some areas, mostly due to crazy housing costs.

But to get back to the topic - Californians may want to look into making charitable contributions to the College Access Tax Credit fund, if it fits their giving goals. Money goes towards college grants for needy students, and you can get a 50% California tax credit for the amount you contribute. It's been around for awhile, but the credit was mostly used by folks trying to avoid California AMT - I suspect with the federal tax changes, it could become more popular with people just trying to maximize the amount they are able to give to charity. I believe other states have charities that give similar tax credits, but I'm in California, so I've only heard of this one specifically.

 

[tvguy]

California varies WIDELY by county. I'm slightly above middle class in Sacramento County, in Santa Clara County with the same salary I'd be in the lower half of middle class, in San Diego county I'd be in the upper half of middle class and in Shasta County I'd be rich LOL

People just need to realize that costs of living can be crazy different in different areas, even ones that are only a few hundred miles away (that's not targeted at you specifically TVGuy, I've just seen comments the last few days that indicate some people don't get it). Most of that difference is due to housing costs.

But to get back to the topic - Californians may want to look into making charitable contributions to the College Access Tax Credit fund, if it fits their giving goals. Money goes towards college grants for needy students, and you can get a 50% California tax credit for the amount you contribute. It's been around for awhile, but the credit was mostly used by folks trying to avoid California AMT - I suspect with the federal tax changes, it could become more popular with people just trying to maximize the amount they are able to give to charity. I believe other states have charities that give similar tax credits, but I'm in California, so I've only heard of this one specifically.

Employers have to pay higher salaries in areas with higher costs of living. Otherwise, people can't afford to work there. Which is why San Francisco has a $15 an hour minimum wage starting January 1, versus the state $10.50 an hour versus the Federal $7.25.

 

[smcabee]

We are continuing our charitable donations 2018 and will see how it all shakes out next year. Depending on the results we may just put charitable contributions in a savings account and donate every 2 years or so.