EAlert: IRS Issues Workarounds for SALT Deduction

On December 22, 2017 President Trump signed into law the Tax Cuts and Jobs Act. For taxpayers in high tax jurisdictions like NY, CT & NJ, the new law greatly impacts the ability to deduct state and local taxes by limiting the deduction to $10K (Real estate and Income taxes combined).  Recently, many states have been creating new laws that combat this limitation by allowing its taxpayers to make a contribution into a state run charitable fund. The purpose of this contribution is to allow for a credit in the subsequent year against the taxpayer’s real estate taxes.

For example:

A taxpayer with $10K in real estate taxes can contribute $10K to the fund, which allows them to take a charitable contribution as well as a $10K deduction for state income taxes.

On May 23, 2018, the IRS issued Notice 2018-54 stating that it intends to propose new regulations to address the contributions to a fund controlled by the state and is being utilized as a workaround to the $10K state and local deduction limitation.  The proposed regulations will reference the “substance-over-form” principal, whereby the economics of the transaction are examined to determine the true treatment of the contribution.

Jeffrey G. Cohen Jeffrey G. Cohen, CPA is the Partner-in-Charge of Tax Services at Grassi. With over 30 years of experience, Jeff specializes in serving companies within the Manufacturing and Distribution Industry, with an emphasis on the Food & Beverage and Pharmaceutical sectors. A leading tax expert in the New York Metropolitan area, Jeff has enabled his clients to realize significant tax savings through proper Income and... Read full bio

Lisa Rispoli Lisa Rispoli is the Partner-in-Charge of Trust & Estate Services at Grassi and leader of the firm’s Private Client Services group. She has over 30 years of experience in accounting, estate planning & valuation, as well as gift, estate and trust taxation. Lisa is adept at working with clients and their professional advisors to develop estate plans to transfer family, business and personal wealth... Read full bio

Alice H. Varisano Alice H. Varisano is a Partner within the Tax Services Practice at Grassi. She has been practicing for more than twenty-five years and has extensive experience in domestic and international taxation, business/program analysis, budgeting, cost reduction/control, continuous process improvement and staff development. Her work extends across a variety of industries, including Construction, Architecture & Engineering, Manufacturing & Distribution, Hospitality, Healthcare, and Retail & Consumer... Read full bio

Categories: Tax