 |
Charitable Contributions and State Tax Credits
IRS issue proposed regulations
 The proposed regulations issued are designed to clarify the relationship between state and local tax credits and the federal tax rules for charitable contribution deductions. Under the proposed regulations, a taxpayer who makes payments or transfers property to an entity eligible to receive tax deductible contributions must reduce their charitable deduction by the amount of any state or local tax credit the taxpayer receives or expects to receive.
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.
These regulations come after certain States were seeking ways for their taxpayers to get around the $10,000 cap on the federal tax deduction for state and local taxes (SALT).
|
|
© 2018 KVLSM LLP – CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS – NEW YORK
This e-mail and any attachments are intended exclusively for the individual or entity to which it is addressed. It may be confidential or legally privileged. If you received this
message in error or are not the intended recipient, you should destroy the e-mail message and any attachments or copies, and you are prohibited from retaining,
distributing, disclosing or using any information contained herein. Please inform us of the erroneous delivery by return e-mail. Thank you for your cooperation.
|
