Proposed Regulations Block SALT Workarounds

The Treasury and the IRS have issued proposed regulations regarding charitable contribution deductions when the taxpayer receives or expects to receive a corresponding state or local tax credit. This is in response to state workarounds to help offset the TCJA's state and local tax (SALT) deduction cap, which allows filers to claim only up to $10,000 on their federal tax return. 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. Click here for the IRS press release, and here for the California perspective from the Los Angeles Times.