We are thrilled to announce that Prestige Accounting Services Group (previously Prestige Wealth Accounting Group) has joined forces with Bacchetta & Company in an exciting new partnership!
SALT Deduction - Battle Lines Have Been Set and Swords Have Been Drawn
Article Highlights:
- SALT Tax Limits
- State Work-arounds
- Converting Tax Deductions to Charitable Contributions
- IRS Regulations
- Taxpayer Beware
As it turns out, CA, CT, NJ and NY are among the states with the nation’s highest combined state income and property taxes, and they happen to be blue states. As a result, the legislatures in these states have passed or are working on legislation at the state level to circumvent the federal $10,000 limit on SALT deductions by transforming tax deductions into charitable deductions through some clever legislation.
New Jersey and New York have already passed legislation that permits local governments to establish charitable bodies, to which their taxpayers can contribute and, in turn, receive credit against their state’s taxes, thus converting what would be a tax payment into fully deductible charitable contributions. For New Jersey, the credit against tax is 90% of the charitable contribution; for New York, it is 85%. Connecticut has a similar program, and California has one working its way through the legislature.
Note that in the example, it is costing the taxpayer $750 (15% of the $5,000) – the difference between the charitable contribution and the tax credit – to buy the tax benefit. Thus, this work-around does not benefit lower-income taxpayers who are in the 10 or 12 percent tax brackets, since it is costing them $750 to acquire the benefit but their federal tax savings at the 12% tax rate would only be $600 (12% of $5,000).
The U.S. Treasury recently put these states on notice that regulations would be released that would essentially nullify these states’ efforts to circumvent the federal tax law, and on August 23, the IRS released proposed regulations that would essentially squash these attempts. The proposed regulations would limit the charitable deduction to the difference between the amounts contributed to the charitable fund and the credit received against taxes, effective for contributions made after August 27, 2018.
Out of concern for already existing programs in a number of states that provide state tax credits for charitable, education and other public benefit programs, the proposed regulations include a de minimis exception by allowing a dollar-for-dollar state tax deduction or tax credit if the deduction or credit is no more than 15% of the contribution or, if property is contributed, no more than 15% of the value of property.
We have certainly not heard the end of this issue. Governor Cuomo of New York has been very vocal on the issue, calling it politically motivated, and has spearheaded a lawsuit by four states to have the SALT limitation struck down, although legal experts see little chance that the lawsuit will have any success.
Taxpayers in states and jurisdictions offering the work-arounds should carefully consider whether or not to participate, especially in light of the proposed regulations. If you have questions, please call this office.
More About Us
Get to Know Prestige Accounting Services Group (previously Prestige Wealth Accounting Group)
Offices in Flemington, NJ and Califon, NJ
Our Mission: At Prestige Accounting Services Group (previously Prestige Wealth Accounting Group), we are on a mission to redefine the tax experience for individuals and small businesses. With a focus on personalized service, strategic planning, and expert guidance, we aim to empower our clients to succeed financially with confidence and ease.
Expertise in Action: With a wealth of experience and a team of dedicated professionals, we specialize in individual and small business tax preparation. While we excel in all areas of taxation, our passion lies in serving the unique needs of small business owners in New Jersey. We understand that small business taxation requires specialized knowledge and attention to detail, which is why we go above and beyond to ensure our clients receive the guidance and support they deserve.
Tailored Solutions for Every Client: Whether you're a high-net-worth individual seeking comprehensive tax planning or a small business owner in need of accounting and bookkeeping assistance, we have the expertise to meet your needs. Our team takes the time to understand your specific situation and develop customized solutions that align with your goals and objectives.
Why Choose Us?: What sets us apart from other New Jersey tax firms is our commitment to excellence and innovation in the field of taxation. We don't just prepare tax returns; we provide strategic insights, proactive planning, and actionable advice to help our clients achieve their financial goals. With a team of two CPAs, an EA, and an ERO, we have the expertise and resources to deliver exceptional service and results.
Your Success is Our Priority: At Prestige Accounting Services Group (previously Prestige Wealth Accounting Group), we measure our success by the success of our clients. We are dedicated to building long-lasting relationships, providing unparalleled service, and helping our clients thrive in today's ever-changing tax landscape.
We can't wait for you to experience the Prestige Accounting Services Group (previously Prestige Wealth Accounting Group) difference.
Tax & Small Business Updates
Get the latest in tax and small business updates and issues that affect your finances and growth prospects.