The IRS intends to issue regulations pertaining to states’ attempts to subvert the state and local tax deduction cap.
- The Tax Cuts and Jobs Act imposed a $10,000 ($5,000 for married individuals filing separately) limit on state and local tax deductions for federal income tax purposes.
- Certain states, including New York, New Jersey, and Connecticut, have enacted legislation to allow taxpayers to claim a federal tax deduction in excess of the SALT cap.
- The pending regulations will emphasize that federal income tax substance-over-form principles, not state laws, dictate the characterization of the charitable contributions.