By notice IR-2019-109 on June 11, 2019 the U.S. Department of the Treasury and the Internal Revenue Service issued final regulations that require taxpayers to reduce their charitable contribution deductions by the amount of any state or local tax credits they receive or expect to receive in return. In a notice also issued the IRS stated that taxpayers may treat payments they make in exchange for these credits as state or local tax payments. This allows some taxpayers to deduct certain of the payments as taxes.
Treasury Decision 9864, available in the Federal Register, finalizes proposed regulations published August 27, 2018, that were designed to clarify the relationship between state and local tax credits and the federal tax rules for charitable contribution deductions. The Treasury Department and the IRS issued the Treasury Decision after carefully reviewing the more than 7,700 written comments received during the comment period and 25 comments made at the November 2018 public hearing. The final regulations, which apply to contributions made after August 27, 2018, and are effective on August 12, 2019, largely adopt the rules in the proposed regulations. Under the final regulations, a taxpayer making payments to an entity eligible to receive tax-deductible contributions must reduce the federal charitable contribution deduction by the amount of any state or local tax credit that the taxpayer receives or expects to receive in return. The effect of these final regulations on Pennsylvania EITC donors federal donation deduction depend on he donors individual situation.
As always we encourage all donors to participate in EITC as an extremely tax efficient way to redirect state taxes to a local Pennsylvania K-12 or preschool tuition based school of the donors choice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
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AuthorRandy Tarpey CPA Categories |