1. Understanding
the Impact of
Tax Reform
Chris and Supriya – 20 min

2. Overview of the impact on:
Individuals
Stanford
Chris – 10 min
Financial Management Services
September 18, 2019

3. Impact on Individuals Current Tax Law New Tax Law Personal tax rates
Seven tax brackets: 10%, 15%, 25%, 28%, 33%, 35%, 39.6%
Seven tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, 37%
Standard deduction
Married filing jointly: $12,700 Head of household: $9,350 Single: $6,350
Married filing jointly: $24,000 Head of household: $18,000 Single: $12,000
Child tax credit
$1,000 per child
$2,000 per child (refundable to $1,400 per child); $500 for non-child dependents
Personal exemption
$4,050
Repealed
State income, sales & property tax
Itemized deduction, no limit
Property tax and either income or sales tax limited to $10,000
Mortgage interest
Deductible on up to $1.1 million debt; interest on second home deductible
Deductible on up to $750,000 of debt (including second home); no home equity interest deduction
Chris – 10 min
include disclaimer
Alternative minimum tax (AMT) rules have been greatly eased
Financial Management Services
September 18, 2019

4. Impact on Individuals Rate
For Unmarried Individuals, Taxable Income Over
For Married Individuals Filing Joint Returns, Taxable Income Over
For Heads of Households, Taxable Income Over
10% $0
12%
$9,525
$19,050
$13,600
22%
$38,700
$77,400
$51,800
24%
$82,500
$165,000
32%
$157,500
$315,000
35%
$200,000
$400,000
37%
$500,000
$600,000
Chris – 10 min
Financial Management Services
September 18, 2019

5. Impact on Individuals Itemized deductions subject to 2% floor repealed
Exclusion for qualified moving expenses reimbursement and deduction suspended
Elimination of exempt employee achievement awards
Exclusion for qualified bicycle commuting reimbursement suspended
Alimony relating to divorces after 12/31/18 is not deductible
Casualty losses can only be taken in a declared disaster area
Medical expenses in excess of 7.5% of gross income are deductible in Exclusion rises to 10% in 2019
Chris – 10 min
Financial Management Services
September 18, 2019

6. Impact on Individuals
50% AGI limitation for charitable contributions increased to 60% for gifts of cash to specified organizations
20% of net income exclusion is available for many small businesses (proprietorships and S-corporations)
529 education saving plan funds up to $10,000 per year may be used to pay for K-12 school tuition and contributions may be made on behalf of a pre-born child
The Pease rule, which reduces itemized deductions by 3 cents for every dollar of gross income in excess of $313,000, is eliminated
The estate tax exclusion doubles to nearly $11 million per person ($22 million per couple)
Chris – 10 min
Financial Management Services
September 18, 2019

7. Impact on Stanford Excise Tax on Investment Income
1.4% tax on net investment income of the University and controlled entities
Includes interest, dividends, rents, & royalties from all sources
Effective date: 9/1/2018
Supriya – 10 min
more details to come on how this will be impact overall funding and endowment payout process
Financial Management Services
September 18, 2019

8. Impact on Stanford Excise Tax on Excess Executive Compensation
21% tax on Stanford for remuneration over $1M paid to covered employee
Covered employee = Top 5 highest paid during the tax year and once a covered employee, always a covered employee
Effective date: 9/1/2018
Supriya 10 min
Example “Coach Shaw”
Financial Management Services
September 18, 2019

9. Impact on Stanford
Unrelated Business Taxable Income (UBTI) to be Separately Computed for each Trade or Business
UBTI is income from a trade or business that is regularly carried on and not substantially related to the university’s mission
Unrelated business income from one activity cannot be offset by loss from another activity
Effective date: 9/1/2018
Supriya 10 min
Examples (Alumni magazine, Golf Course)
Financial Management Services
September 18, 2019

10. Impact on Stanford Tax on Certain Fringe Expenses
21% Tax on Stanford for expenses incurred in providing employees with qualified transportation benefits and use of athletic facilities maintained substantially for employees.
Effective date: 1/1/2018
Supriya 10 min
Financial Management Services
September 18, 2019

11. Any Questions?
Financial Management Services
September 18, 2019