You’re Actually Paying Less Taxes

By Chesky Landa, CPA

Now that many deductions, including property taxes, cannot be fully deducted from your Federal tax bill, many people are concerned that they will be paying more in taxes.

But believe it or not, chances are that you will be paying less. Larger families especially may find themselves coming out ahead. Here are a few changes that will have a positive impact.

1. Education Deductions

Numerous attempts by askonim to make moneys spent on private school tax deductible including Cheder have not been successful. The recent tax law signed by President Trump finally allows such deductions.

In the past, education accounts – known as 529 accounts – were only allowed to pay for college-level education expenses, including some seminaries and yeshivos. As long as the money was used for qualifying expenses, all gains on the accounts would be tax free.

The new tax law expands the schooling options to allow almost all private schools, starting from kindergarten. If used correctly, this can help ease the financial burden of tuition on our community.

Similar to a Roth IRA, only the gains of education accounts are tax free. The initial contributions into the account are still taxable. This means that in order to realize a tax benefit, the money would have to to be invested and accumulate profit.

However, New York does allow deductions of the principal amount. It is fully deductible off of state taxes. That can potentially be a significant saving for those of us living in New York State.

Will NYS emulate the Federal code and allow deductions for Kindergarten as well? We don’t know yet. Most states have not announced how they will treat withdrawals for these pre-college educational expenses.

(To stay in the loop on any updates about 529 education accounts, ask to get on the Agudah’s mailing list: [email protected])

2. Child Tax Credit Doubled

Under the new law, the child tax credit will double, from $1000 to $2000 per child. It is taken straight off tax owed, with $1400 of it refundable (an increase of $400 from last year).

How much of a difference can this make? Well, in a basic scenario we ran of $80,000 gross income and five dependents, the 2018 tax refund would be $3,661 — compared with only $90 under the previous tax law — and the main reason is the $2000 per child credit.

For more information and tax advice specific to your individual situation, contact a tax professional.

3. NYS Paid Leave

Although not part of the tax reform it is noteworthy that New York State enacted another policy recently. The NYS Paid Family Leave (PFL) requires private employers to grant 8 weeks’ time off for bonding with a new child – whether for mother or father. Time is also available for other reasons, including military deployment, or caregiving for a close relative with serious health needs, r”l.

This benefit won’t cost you much either, only $1.65 a week, while you can get up to 50% your salary while on paid leave. The benefit is capped $652.96 per week, for a total of $5,223.68. This benefit will continue to increase over the next few years.

While not all employers and employees are automatically covered. For example, 501 (c)3 institutions and their teachers, it would be wise for them to opt-in, since this insurance-based program is funded from the employee’s paycheck.

Full-time and some part-time employees are eligible, so long as your employer carries disability insurance, you should be eligible for this benefit. Being a U.S. citizen or even a New York resident is not a requirement.

If you’re self-employed, you can opt in as well, and receive payments if you need to take time off from work. You’ll need to get both disability coverage and Paid Family Leave coverage through an insurance carrier.

–Chesky Landa, CPA is a tax accountant and preparer with many years of experience and expertise helping individuals and small businesses understand their tax scenarios. This article is meant for general information and does not constitute specific tax or legal advice. Contact him at 347-613-4259, [email protected] or visit his new office at 271 Kingston Avenue (above Boeuf and Bun) in Crown Heights.