At the end of May, 2018, the IRS issued Notice 2018-54. The Notice indicates that the IRS is working on proposed regulations to address State attempts to circumvent the new laws regarding the deductibility of state and local tax payments on an individual’s federal income tax return.
See SB 227, which would have started the California Excellence Fund allowing taxpayers to make payments to the fund and deduct those payments as charitable deductions. This was an attempt to help taxpayers in California achieve more deductions on their tax returns, since under the new federal tax law state and local income tax deductions are limited to $10,000. Other states like New York were contemplating similar laws.
The Notice reiterates that federal law controls the characterization of payments for federal income tax purposes without deference to state law.
If the proposed regulations are passed, the California Excellence Fund would likely not happen.
If you have questions about the new tax laws, you should reach out to a tax lawyer who can assist you with your questions and concerns.
Mendes Weed, LLP is here to help you if you have any questions. (925) 390-3222.
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