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Thread: IRS Notice on SALT limitations and "charitable contributions"

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  1. #7
    Join Date
    Oct 2015
    Posts
    635

    Default What about tax deduction instead of credit?

    Intent to Make a Charitable Contribution

    Can we agree that a significant portion of current charitable contributions are in part dependent on the availability of a federal itemized tax deduction? We have already seen reports that charities are working hard to get their donors to work on alternate-year-doubling strategies for continuing to get some kind of tax break, so somebody involved thinks the tax break is an item of value received by their donors in exchange for the donation. And then there is the continuing popularity of the QCD from the IRA for 70 1/2 year olds and up, I think that is most often promoted as a tax break.

    For making a donation to a state or locality for the general good (allowed under the tax code previously cited), what if instead of a credit against state taxes, they gave a deduction against state taxable income? Call it the "double (or triple) your federal deduction" deduction. If taxpayer donates $1,000 to a qualified gov't charity or whatever we're calling it, then they get $1,000 federal itemized charitable deduction and $2,000 (or $3,000) state itemized charitable deduction, under state law. After all, on the federal return of itemizers, there is a deduction allowed for charitable contributions, and that doesn't seem to conflict with the "expecting something in return" (tax break) rule.

    If the state deduction for charitable contributions was pegged to AGI somehow, it could probably be fine-tuned to work similarly to the credit. I haven't yet tried to work up test cases to get the exact ratio of state to fed deduction, but could if needed. Paying into the state/local public benefit charity would of course be optional for everyone.
    Last edited by Rapid Robert; 05-31-2018 at 08:00 PM.

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