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Why ‘charitable contributions’ won’t help you get around SALT deduction limits

Bill Bischoff
Why ‘charitable contributions’ won’t help you get around SALT deduction limits

For 2018-2025, the Tax Cuts and Jobs Act (TCJA) imposes a new limitation on itemized state and local tax (SALT) deductions: $10,000 or $5,000 for those who use married filing separate status. One brainstorm was to give folks SALT credits in exchange for purported “charitable contributions” to state-run “charitable funds.” This would magically convert non-deductible SALT payments into a deductible “charitable donation.” Shazam! Such schemes offer citizens the choice of: (1) making tax payments to state and local governments and living with the federal SALT deduction limitation or (2) making what you — in a display of unbridled optimism — believe are federally deductible payments to state-run charitable entities in exchange for SALT credits. In an unsurprising development, recently issued IRS regulations disallow such “charitable deduction” schemes.