Charitable Contributions and SALT Deduction

Technical topics regarding tax preparation.
#1
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Well we all knew it was coming:

https://www.irs.gov/newsroom/treasury-i ... ax-credits

From IRS Newswire:

For example, if a state grants a 70 percent state tax credit and the taxpayer pays $1,000 to an eligible entity, the taxpayer receives a $700 state tax credit. The taxpayer must reduce the $1,000 contribution by the $700 state tax credit, leaving an allowable contribution deduction of $300 on the taxpayer’s federal income tax return. The proposed regulations also apply to payments made by trusts or decedents’ estates in determining the amount of their contribution deduction.

The proposed regulations provide exceptions for dollar-for-dollar state tax deductions and for tax credits of no more than 15 percent of the payment amount or of the fair market value of the property transferred. A taxpayer who makes a $1,000 contribution to an eligible entity is not required to reduce the $1,000 deduction on the taxpayer’s federal income tax return if the state or local tax credit received or expected to be received is no more than $150.
 

#2
lucyko  
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There will be no "happy campers" for folks in NY ,NJ, CT ,and CA . All that late night tax legislation maneuvering to create state credits for naught . We all new it was going to be a long shot.
 

#3
Preppie  
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Virginia's targeted tax credits under the neighborhood assistance program may be collateral damage.
 

#4
makbo  
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However, we still have NYS Employer Compensation Expense Program as a possibly safe way to do it. And eight years at least to figure out other things, or challenge the SALT limit in court, as I understand is already happening. Protective claims to be filed?
 

#5
makbo  
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ManVsTax wrote:The proposed regulations provide exceptions for dollar-for-dollar state tax deductions

Oh well, there goes my previously posted idea of 3-dollar-for-dollar state tax deductions. However, what is the legal justification for limiting the exception to dollar-for-dollar deductions? Why should they be able to disallow state tax deductions at all (as opposed to credits?)

There are several forms of charitable deduction where the allowed federal deduction is larger than the amount paid or transferred (i.e. more than dollar-for-dollar deduction). I think I had some other examples if I can find my old post on this from earlier this year.
 

#6
Wiles  
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"Upcoming IRS rules could chill these red-state tax credit programs"
https://www.cnbc.com/2018/08/22/upcomin ... grams.html
 

#7
WEISSEA  
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How will the IRS verfiy the state tax credit will offset the claimed charitable donation without a copy of the State tax return?
 

#8
Wiles  
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They will add another column to the Preparer Due Diligence form
 

#9
Skatter  
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Mass. has what it calls a Community Investment Tax Credit, a program about which I posted a tax question last March:

viewtopic.php?f=8&t=11706&p=107031&hilit=community+fund#p107031

The state provides donors with a 50% refundable tax credit for their contribution which they are encouraged to deduct in full as a charitable donation from their federal taxes.

Does this Proposed Reg mentioned in the OP apply to such a credit program as well?
 

#10
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Anyone have any updates on this proposed reg since the hearing date has passed?
 


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