Taxpayers in New York have four days to try beating cap on state, local deductions
IRS has moved to block charitable workarounds effective after August 27
New Yorkers trying to beat the new federal limit on state and local tax deductions might only have a few days left to do so.
The Internal Revenue Service moved closer to blocking charitable workarounds that states such as New York had approved in response to the new federal tax law’s limit on local and state deductions, but the regulations will not take effect until after Aug. 27, according to Bloomberg. This could give New York taxpayers who either already made charitable donations this year or can make them in the next four days a potential 2018 tax break.
The $10,000 limit on state and local tax deductions in the new federal tax law does not go very far in Northeastern states with high property taxes, so some municipalities set up charitable funds for residents to help allow taxpayers to write off their full donation amounts from federal taxes. However, some of these systems might not be ready yet to accept payments.
After August 27, taxpayers will only be eligible for a federal deduction that makes up a small portion of their charitable donations.
Last year, taxpayers tried to prepay their 2018 real estate tax bills in time to apply it to their 2017 tax return, where unlimited deductions on state and local taxes were still allowed. However, after guidance from the IRS, only people who already had their taxes assessed qualified for the additional write-off.
Michael Greenwald, a partner at the accounting firm Friedman, told Bloomberg that even taxpayers who make contributions before Aug. 27 should not count on anything.
“It is possible that contributions before the effective date will be challenged,” he said. [Bloomberg] – Eddie Small