What you need to know about the new tax law

You may be wondering how the new tax law will affect you or your organization. Everence^® is prepared to help you better understand the law and consider the potential impact for your financial planning.

Please note: What follows is a sampling of changes to the tax law. Many provisions for individual taxpayers expire in 2025. Since every financial situation is unique, please contact your financial advisor or accountant with specific questions or for advice.

1. New tax brackets and rates – IRS tool helps you know where you stand

Check out the IRS Withholding Calculator to make sure the amount of federal taxes you’ve instructed your employer to withhold from your paycheck (via your W-4 form) still makes sense for your current financial situation. This simple step can help you avoid surprises related to underpaying your taxes (tax bill) or overpaying your taxes (tax refund) when you file your 2018 tax return.

For a breakdown of the new tax brackets and corresponding rates, check out this Forbes.com article.

2. New provision for families with children in private or religious K-12 schools

The 529 tax-advantaged plans have been expanded to include K-12 private or religious schools’ tuition and expenses (up to $10,000 per child, per year). These plans, which previously were restricted to higher education, provide tax-free earnings on investments and tax-free withdrawals. You may benefit from additional state tax savings, depending on where you live. If your children attend private or religious school, check with your financial planner to see if a 529 plan could be right for you.

3. To itemize or not to itemize – new standard deduction levels

Standard deductions have been raised – for individuals, the deduction is $12,000 (up from $6,350) and for married, filing jointly, the deduction is $24,000 (up from $12,700). With these increases, people who previously itemized their deductions may no longer find this practice yields tax savings. At the same time, all personal and dependent exemptions have been eliminated.

4. Tax credits for children

The child tax credit has been raised from $1,000 to $2,000 and includes a cut-off age of 17, along with other stipulations.

5. Potential impact on charitable contributions and the benefits of donor advised funds

With fewer people itemizing deductions, fewer middle-class Americans may see a direct connection between their charitable donations and tax savings. As a result, now – more than ever – it’s important for churches and nonprofit organizations to nurture members’ intrinsic desire to give that flows from their core values and beliefs.

Those looking for additional ways to maximize their tax savings as they give still have several options.

• Qualified Charitable Distribution (IRA charitable rollover)
• Gifts of commodities, securities, real estate or other items of value 
• Donor advised funds – These funds remain an attractive option for “bunching” in which, for instance, donors “bunch” several years of contributions into one year, take the tax deduction, and also maintain annual charitable giving levels to churches and charities through the fund.

6. For pastors, the Clergy Housing Allowance remains

In some instances, the biggest news about the new tax bill is what didn’t change. While there had been some concerns about this tax break, the new tax law leaves the Clergy Housing Allowance in place, which comes as welcome news for many pastors who rely on this provision.

7. Pass-through business tax break – does your small business qualify?

The short answer is that you’ll probably need to check with your accountant or financial advisor. The New York Times provides an overview: “Individuals can generally deduct 20 percent of their qualified business income from a partnership, S corporation and sole proprietorship. There are limits, however, including a phase-out for the deduction that begins at $157,500 of individual income and $315,000 of income for couples filing jointly.”¹