The New Tax Law – 2018 – How it affects frum families

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  • #1431434

    Joseph
    Participant

    Under the new law, a hypothetical frum middle class family with eight dependent children would lose the personal deductions of $4,050 per person but gain an additional Child Tax Credit of $1,000 (for a total of $2,000) per child. Will the additional $1,000 of Child Tax Credits make up for the missing personal deductions? Will it be made up with the new lower tax rates?

    Will it be beneficial to funnel all K-12 Yeshiva tuition into a 529 Account and from there to the Yeshiva? How much will that save on taxes?

    What other changes have a pronounced affect on frum, large and/or private school families?

    #1431479

    midwesterner
    Participant

    Child Tax Credit stops at age 17. Deduction goes until marriage.

    #1431645

    Joseph
    Participant

    For children under 17 you are better off with the extra $1,000 credit than the $4,050 exemption for any income up to $315,000/year for married filing joint. The extra child tax credits for the kids 17 and under, in addition to the lower rates and the new higher standard deductions, probably mean the overwhelming majority of large frum families are much better off overall even with the loss of the exemptions for children 17 and older.

    And then there’s the new 529 accounts for Yeshiva tuition.

    #1431766

    akuperma
    Participant

    A lot depends on how one defines middle class. In many frum communities, especially in New York City, a large percentage of people rent rather than own. And one has to ask does “middle class” mean both parents are working full time for the goyim at real salaries, as opposed to the working for frum organizations for mediocre salaries (not to mention the possibility of the husband learning at least part time, and the wife being a homemaker). For those who don’t itemize, the doubling of the standard deduction more than makes up for the elimination of exemptions. For home owners with two-incomes (both spouses have advanced academic degress and jobs to match their academic backgrounds), the changes in the tax law may prove quite negative (they don’t benefit from the increase in standard deduction, they may be losing deductions for taxes and mortgages, and such families typically don’t have many children).

    #1432114

    🍫Syag Lchochma
    Participant

    Joesph, it is true that a tax credit is more beneficial than a deduction as your deductions can zero you out but the credits are a cash in hand refund. The problem is that it isn’t $2000 for kids under 17. It’s $2000 minus education credits. and you can be supporting 10 unmarried kids without having a handful under 17.

    #1433182

    Joseph
    Participant

    Syag, which “education credits” are deducted from the $2,000 per child tax credit?

    #1433514

    Gadolhadorah
    Participant

    A lot depends on the combined income of the husband/wife, their investment income and how they are affected by AMT (as a function of their other deductions. The way this bill was drafted and the loss of the SALT deductions over $10K (for income taxes but not property taxes) a family in NYS/NJ/CA will be affected differently than those in FL or TX. The families hurt most are generally upper middle income with combined incomes in the $250-$400K/year taxable income living in a high tax state

    P.S. The average orthodox family in the U.S. has 4 kids, NOT 8….

    #1433519

    lesschumras
    Participant

    The k-12 529 did not make the final bill . At the last minute Democrats pointed out that this and 2 other items violated Senate procedural rules. That is why the House had to vote a second time

    #1433523

    Joseph
    Participant

    LC: The K-12 529 Account *did* make the final bill that’s on Pres. Trump’s desk today. The only last minute change to the 529 (that the Senate made, causing a re-vote in the House) was that it removed the home-schooling coverage from the 529; the K-12 coverage remains part of the new law’s final provisions.

    GHD: The AMT was changed in the new law to affect much fewer taxpayers than in the old law. SALT’s $10k allowance was modified in the final bill Congress passed to cover both income taxes *and* property taxes. $10k should be sufficient to cover most middle class homeowners. Additionally, they save in the form of lower taxes from the other provisions of the law that lowers other parts of their taxes owed.

    When you count the average family size you’re counting families that have X number of children but are still having more after you count the current average. Like that you might count an average of 5 or 6. If you only count families that have completed having children, the American Orthodox average is closer to 7 or 8. (Note that Chareidim are 75% of American Orthodoxy and Chasidim are approximately a majority, or close to it, of Chareidim. Visit Williamsburg or Lakewood one day and count the number of children per family. It isn’t hard to find those with 10.)

    #1433550

    lesschumras
    Participant

    Joseph, once again,you are pulling numbers out if the air. Please cite your source for close to 7 to 8 being the average number and that 75% are chareidi. In addition, Dr purposes of a discussion on taxes, you have to exclude communities like KJ that are almost entirely on public assistane and thus are not affected

    #1433579

    Joseph
    Participant

    Approximately 75% comes from Pew Research 2013.

    #1433583

    Neville ChaimBerlin
    Participant

    Lesschumras, wanna cite a source that KJ is almost entirely on public assistance or would you rather just be hypocritical?

    #1433600

    iacisrmma
    Participant

    Joseph: “both income taxes *and* property taxes. $10k should be sufficient to cover most middle class homeowners”. How about those in Nassau County or Monsey whose property tax alone is >$10,000?

    Neville Chamberlin: As of December 2016, KJ was the poorest area in NYS.

    Not only did Kiryas Joel have one of the lowest-incomes in our state, it also came in as having the lowest per capita income out of any other location in America with a population of over 10,000 residents. The community is mostly made up of Hassidic Jews out in Orange County, with the average resident making only $4, 355 per year.

    In 2014, 93% of KJ was on Medicaid (medical coverage for poor people). (Orange County Department of Social Services)

    #1433627

    akuperma
    Participant

    Chareidim win.

    Bnei Torah (meaning employed by the frum community, though in many cases the word “”Employed” needs to be taken with a grain of salt) win

    The deplorables (working class, especially in “red” states) win

    Rich Baal ha-battim lose

    People with mansion and good incomes (especially two-income families, when both have real jobs), especially in “blue states” lose

    Corporations win (but if they distribute the winnings to real humans, those humans will in many cases be losers, see above)

    #1433655

    Joseph
    Participant

    iac: 1) They’ll save from the lower tax brackets, higher deduction, 529s, and the other provisions lowering other areas of taxes, even if they lose a part of the property tax deduction and 2) they should blame their high-tax state for their high-tax state property tax; the feds aren’t setting their property taxes.

    Regarding KJ, they aren’t one of the lowest income per family; not even close. The reason they qualify for Medicaid and are classified as one of the highest poverty rates is because that is based on family size and not just on family income. So even if he’s earning $80,000/year, since he has 11 children he’s counted as in poverty and gets Medicaid despite earning $80k. But his income is above average based on salary/earnings. And since KJ has large family sides k’h, even though they have above average income per family, they have below average per person. And that gets them counted as impovershed.

    #1433659

    lesschumras
    Participant

    Neville, next time you want to accuse me of being a hypocrite, don’t do it based on one of the most widely reported economic statistics regarding chateidim

    Joseph, so you trust goyish polls when it suits your purposes? The Pew poll says that % of chareidi Jewsis 62% , not 75, and that the average Orthodox family has 4.1 children, not 7. They do not bresak down that number between MO,or Chareidi

    #1433665

    DaasYochid ☕
    Participant

    Neville, next time you want to accuse me of being a hypocrite, don’t do it based on one of the most widely reported economic statistics regarding chateidim

    That’s not a source.

    #1433672

    Neville ChaimBerlin
    Participant

    “Neville, next time you want to accuse me of being a hypocrite, don’t do it based on one of the most widely reported economic statistics regarding chateidim”

    Lol, then it must be really easy for you to find a source. So easy that you still haven’t done it.

    #1433677

    Joseph
    Participant

    In New York State anyone can claim a state income tax deduction of up to $10,000 per year for Yeshiva education tuition costs paid from a 529 Account. As a result of the new federal tax law, starting in January 2018 it makes sense for everyone with Yeshiva K-12 tuition charges to pay it from a 529 Account. This will allow the first $10,000 of tuition every year to be deducted from your New York State income taxes. You can put the money into a 529 Account and then immediately use it to pay tuition. That’s all you need to do to get the State income tax deduction.

    Some other states have much more generous 529 allowances than the NYS $10,000. In those states this tax benefit for Yeshiva tuition costs will be even larger. Illinois, for instance, allows deductions for $20,000 in contributions a year per beneficiary (in other words – per child) to 529 plans, while Pennsylvania allows $28,000. Colorado, New Mexico, South Carolina and West Virginia have broader tax benefits: all 529 contributions are fully deductible, so participants’ entire private school tuition could be free of state tax.

    I think this is important information for all yeshiva tuition paying parents to know. This all starts in 10 days.

    The tax bill was signed into law today by President Trump.

    #1434154

    lesschumras
    Participant

    As per the Census bureau, of 3700 cities, towns and villages with at least 10,000 residents, KJ is the poorest. 70% live in homes with incomes below federal poverty guidelines, 40% are on food stamps and nearly 50% are on Medicaid

    #1434204

    Joseph
    Participant

    Poverty guidelines and entitlement benefits are based on family size. If KJ had an average of 3.14 people per family, like the American national average was in 2016, rather than an average family size of 11 (two parents and nine children k’h), then KJ would be considered to have an above average income and below average poverty rate (and wouldn’t qualify for as much Medicaid and food stamps.) It is only because of their large family sizes that results in their being counted as impovershed and qualifying for benefits. Their per family income, in terms of actual dollars per year, is not below the national average per household.

    #1436382

    Lilmod Ulelamaid
    Participant

    “The Pew poll says that % of chareidi Jewsis 62% , not 75,”

    Wow! I hadn’t realized it was that hard (even if it’s “only” 62%). How do they define Chareidi? Do they leave it to the people to define themselves? And do they actually use the term “Chareidi”?

    #1436390

    Lilmod Ulelamaid
    Participant

    “and that the average Orthodox family has 4.1 children, not 7. ”

    Do the Pew Polls count singles? If so, the figures will be much higher if you’re not counting singles.

    Also, are they counting older couples? If so, I think that the average Orthodox family today has way more children than they did in the last two generations, so that would also make a big difference if you want to discuss the average Orthodox family with children living at home.

    Also, the Pew Polls are probably counting couples that don’t have any children, and Joseph may not be counting those.

    Also, I think Joseph specifically said that he is talking about the total amount of children that people end up having, which is not what the Pew Polls are calculating.

    Please Note: I don’t know what the average is and I don’t claim to know; I am just pointing out some of the factors that can make a difference in the calculations, and may account for the different opinions.

    #1436424

    Joseph
    Participant

    Lilmod, they leave it to self-identification. The reason the Chareidi percentage of American Orthodoxy is so high is because of the high Chareidi birthrate coupled with the Chareidi influenced Baal Teshuva movement. Additionally, go to almost any Chareidi shul in America and notice how many formerly MO people are there who became Chareidi.

    #1436464

    lesschumras
    Participant

    Joseph, I asked ou cite a source for your 75% figure. You said the Pew report. When i was the number was actually 62, your reaction indicated you had guessed 75 and pulled the Pew as a random source without actually having checkked. You then felt was unreliable. So, once agsn,what was your source for 75%

    LU – in a survey of Orthodx family size, why would singles be a factor

    #1437074

    Lilmod Ulelamaid
    Participant

    LC – I don’t know how these surveys work, but I would assume that an adult single (certainly if he/she is living on his/her own, and possibly even if he/she is not) would count as a family even though he/she doesn’t have children. This would decrease the average number of children calculated in such a survey, and make it appear to be less than it would be if you are not including singles (and I would guess that Joseph was not counting singles).

    #1437080

    Lilmod Ulelamaid
    Participant

    I think that the problem in general with surveys that calculate averages is that an “average figure” is not necessarily the same as “typical” or “most”, and is not necessarily a good indication of “typical” or “most”.

    For example, the average salary in a country does not necessarily reflect the amount of money that most people earn, since there may be a minority of people who are earning way more than the average, and are therefore significantly raising the average.

    I think the median is generally a better way to figure out what is typical than the average is.

    When it comes to family size, if for example, out of 10 families, 7 of them have 7 kids each, but one is still single, one can’t have kids or doesn’t have kids yet, and one only has one kid, the average will be 5 but the median is 7.
    I think that the median is probably a better way to figure out what is typical than the average.

    #1437082

    Lilmod Ulelamaid
    Participant

    qualification to above post: I didn’t really read the details of the subject at hand, so I don’t know which type of calculation is more relevant in this case. I was simply pointing out how and why the calculations could possibly be done in two different ways and reach different conclusions.

    #1437084

    Lilmod Ulelamaid
    Participant

    “Lilmod, they leave it to self-identification.”

    I’m surprised (but happy) that so many American Jews self-identify as Chareidi. I had thought that most American Jews do not use the term.

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