Final Regulations on Charitable Contributions and SALT Credits

Posted by Kim Chen on August 24th, 2019

The IRS has issued final regulations (TD 9864) that require taxpayers to reduce their charitable contribution deductions by the amount of any SALT credits they receive or expect to receive in return. The final regulations, which largely follow rules proposed by the IRS in August 2018, provide exceptions for dollar-for-dollar state tax deductions and tax credits of no more than 15% of the amount transferred. In addition, the IRS has provided a safe harbor that allows an individual who itemizes deductions to treat, in certain circumstances, payments that are or will be disallowed as charitable contribution deductions under the final regulations as state or local taxes for federal income tax purposes. The safe harbor may be used for 2018; therefore, an amended return may be filed if necessary. The final regulations, which apply to contributions made after 8/27/18, are effective 8/12/19. Reg. 1.170A-1(h)(3) and Notice 2019-12.

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