Legislation would allow Californians to donate money to the state instead of pay tax

[spanel]

Not true. California has already set up something like this beginning in tax year 2014. It is called the College Access Tax Credit (CATC). It is a charitable donation for federal purposes, that yields 50% or more state income tax credit. I have heard of no challenges to this on the part of the IRS, and they've had plenty of time.

So if it's already been in effect for four tax years, why couldn't it simply be expanded to additional public-benefit funds? In fact, real conservatives (not the fake ones) should welcome this approach, as it allows taxpayers to pick and choose where they would prefer some of their tax dollars be spent, instead of leaving it entirely up to the legislature.

From the CA FTB web site: "You may also be able to claim a charitable deduction on your federal tax return. If you do this, you must add back the amount of the charitable deduction taken on your federal return as a state adjustment on your California tax return. "

I can only see one way this could work and not bite you.

You donate $10000 to the CATC. You get a 50% credit on your CA taxes ($5000) You only deduct $5000 on your federal return for charity. ($10,000 - $5,000(value of gift received back) = $5000 IRS deduction.

Of course this doesn't work if its 100% deduction on CA return ($10,000 - $10000 (value of taxes lowered) = $0.00 (unless you want to claim $10,000 cancellation of debt income)


Chris

[Rapid Robert]

I can only see one way this could work and not bite you.

You donate $10000 to the CATC. You get a 50% credit on your CA taxes ($5000) You only deduct $5000 on your federal return for charity. ($10,000 - $5,000(value of gift received back) = $5000 IRS deduction.

Of course this doesn't work if its 100% deduction on CA return ($10,000 - $10000 (value of taxes lowered) = $0.00 (unless you want to claim $10,000 cancellation of debt income)

You've got the math wrong. Federal charitable deduction is $10K. CA charitable deduction is $5K, with a $5K credit against tax liability. This is not hypothetical, it's the way it has already been working for four years. State tax credits are not "gifts", if you think they are, please provide an authoritative citation.

[spanel]

You've got the math wrong. Federal charitable deduction is $10K. CA charitable deduction is $5K, with a $5K credit against tax liability. This is not hypothetical, it's the way it has already been working for four years. State tax credits are not "gifts", if you think they are, please provide an authoritative citation.

Common sense would tell you if you donated $10,000 and received $5000 in return, you cannot deduct $10,000 on your IRS return.

Call if want you want.. but by your math, you have $5000 in cancellation of debt income if you deduct $10,000 on your IRS return.

You are plain and simple receiving a direct benefit for your donation.


Chris

[Rapid Robert]

Common sense would tell you if you donated $10,000 and received $5000 in return, you cannot deduct $10,000 on your IRS return.

Call if want you want.. but by your math, you have $5000 in cancellation of debt income if you deduct $10,000 on your IRS return.

You are plain and simple receiving a direct benefit for your donation.


Chris

Taxpayers have been getting state tax credits, some refundable some not, for as long as I can remember, and now all of a sudden you are saying those credits are offsets against state and local tax deduction (or in other words, that state tax credits are taxable income for federal purposes)? Again, if you think state tax credits are taxable gross income for federal purposes, or gifts, please provide an authoritative citation. So far, no one has.

Here's an example: for as long as I can remember, California has had an exemption credit for taxpayer, spouse and dependents (not an exemption deduction, as is the case for federal). So using recent rounded numbers through tax year 2017 (last year of federal deduction), the taxpayer got a federal deduction of $4,000 for a dependent and also a CA state tax credit of $300. So by your "common sense", the taxpayer should need to reduce the federal deduction by $300, yet clearly that is not required. Another example: CA renters credit, which is available even when some of the rental is being deducted on the federal return as an office in home expense. No one argues that you must reduce the OIH deduction because you got a state tax credit based on the same expenditure.

[Rapid Robert]

Arguments based on common sense in tax court = Weak
Arguments based on substantial authority in tax court = Strong

[David1980]

So. . .calling payment of property taxes a "contribution" is not obtuse but likewise considering calling payment of income taxes a "contribution" IS obtuse? ? ?

The logic of such a position totally escapes me.

Likewise, could you please cite a valid reference to support your contention that payment of ANY property taxes is "optional"? I will need to forward that information to my county tax office when their "contribution request" arrives in the mail during the summer months.

FE

Who the heck mentioned "property taxes"? Can you please provide any quote where I mention a "property tax"?

As far as a payment of a voluntary contribution (and not the words "property tax" that you somehow think I used somewhere?), I will use the California College Access Tax Credit fund. https://www.ftb.ca.gov/individuals/C...x_Credit.shtml

It provides a state tax credit to those that contribute to the fund while being deductible at the federal level.