January 3, 2018

THE REGULATORY PRESIDENT:

How high-tax states may try to get around the new SALT deduction cap (Jeanne Sahadi, 1/03/18, CNNMoney)

The thinking is if filers can't deduct the state and local taxes they pay in excess of $10,000 on their federal returns, states like New York, California, New Jersey and Illinois may try to let them get the full deduction anyway -- just by different means.

And those means involve using loopholes created by the hastily passed law.

Allowing filers to make charitable contributions to their states

One possible strategy that tax experts expect states to consider is letting filers make a charitable contribution to their state in exchange for a tax credit and then deduct that contribution on their federal return, since the new law doesn't cap deductible charitable contributions unless it exceeds 60% of your adjusted gross income.

A basic way it might work is this: Say you pay $30,000 in state income and property taxes in 2018. You may only deduct $10,000 of that on your federal return. To help you preserve the deduction for the remaining $20,000, your state government lets you make a $20,000 charitable contribution to the state in exchange for a $20,000 tax credit on your state tax return.

Posted by at January 3, 2018 4:13 PM

  

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