Another reason I love the IRS

A proposed regulation came out yesterday that effects charitable contributions which your state may also give a direct credit for. The regulation, if it goes into effect, will do so Monday.

https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-18377.pdf

Yeah, it's all legalese and mostly mumbo jumbo to people who don't read this stuff for a living but the basics are that if your state gives a direct credit for certain charitable contributions [that is, if your contribution to a given charity directly reduces the amount of state tax you pay] you will now report that contribution as "other taxes" subject to the new state and local tax deduction limit.

This is, as of this moment, a proposed regulation and not carved in stone...until maybe Monday.

I don't know how many of you this would effect but I figured that it was important enough to pass along just in case.

-edit-

Here's an article that gives a little more perspective on exactly what this change means and does so in language humans can understand - https://www.cnbc.com/2018/08/24/taxpayers-scramble-as-proposed-irs-rule-on-local-taxes-cuts-workaround.html

I abhor the new Trump-GOP tax plan, and am especially furious at having my SALT deductions capped. And yes, it has affected some of the house sales around here.

And now, the feds just blocked the work-around.

(CNN) New Treasury rule won't allow SALT deduction workarounds

Chomsky said:

I abhor the new Trump-GOP tax plan, and am especially furious at having my SALT deductions capped. And yes, it has affected some of the house sales around here.

And now, the feds just blocked the work-around.

(CNN) New Treasury rule won't allow SALT deduction workarounds

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Your state, should it choose to do so, could make up for the difference with a state level deduction.

Lutherf said:

Your state, should it choose to do so, could make up for the difference with a state level deduction.

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I'm not sure how that's possible. The feds don't kick-back the additional taxes they're collecting to the states, do they? They're separate financial streams.

Lutherf said:

A proposed regulation came out yesterday that effects charitable contributions which your state may also give a direct credit for. The regulation, if it goes into effect, will do so Monday.

https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-18377.pdf

Yeah, it's all legalese and mostly mumbo jumbo to people who don't read this stuff for a living but the basics are that if your state gives a direct credit for certain charitable contributions [that is, if your contribution to a given charity directly reduces the amount of state tax you pay] you will now report that contribution as "other taxes" subject to the new state and local tax deduction limit.

This is, as of this moment, a proposed regulation and not carved in stone...until maybe Monday.

I don't know how many of you this would effect but I figured that it was important enough to pass along just in case.

-edit-

Here's an article that gives a little more perspective on exactly what this change means and does so in language humans can understand - https://www.cnbc.com/2018/08/24/taxpayers-scramble-as-proposed-irs-rule-on-local-taxes-cuts-workaround.html

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You open to some free CPA advise? Given; not received! :mrgreen:

Chomsky said:

I'm not sure how that's possible. The feds don't kick-back the additional taxes they're collecting to the states, do they? They're separate financial streams.

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Right. The state would have to be willing to take the hit.

Rexedgar said:

You open to some free CPA advise? Given; not received! :mrgreen:

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Ask away. I charge by the beer.

Just read a little further into the proposed reg and it seems that if the state provides a dollar for dollar reduction of state tax based on the contribution it will be excluded from the new rule. Same applies if the credit is $150 or less.

Frankly, the more I read on this the more convoluted it gets. I guess that's good for business but it has contributed to significant hair loss over the years.

Lutherf said:

Ask away. I charge by the beer.

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I have a vehicle that I think works out better for me if I donate rather than sell outright; I cannot pin down these charities that accept vehicles, as to how they establish the value/deduction for that vehicle. I have donated furniture and furnishings and never asked for a receipt for tax purposes. I don’t want to get fat, but I want to get fair value......how many beers is that?

Rexedgar said:

I have a vehicle that I think works out better for me if I donate rather than sell outright; I cannot pin down these charities that accept vehicles, as to how they establish the value/deduction for that vehicle. I have donated furniture and furnishings and never asked for a receipt for tax purposes. I don’t want to get fat, but I want to get fair value......how many beers is that?

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No problem.

The basic deduction for donating a car is $500. If the charity auctions the vehicle then they will give you a letter stating what the car went for and you deduct that amount. If they keep the car and use it then they'll give you a letter that cites whatever value they come up with. Don't count on getting KBB value or something like that for your donation.

That will be a 6 pack of Dogfish Head Palo Santo Maron, a 12 pack of Sam Adams or a couple of 30's of Hamm's light.

Lutherf said:

Right. The state would have to be willing to take the hit.

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I'd prefer the feds take the hit, and let my local government work with me.

Chomsky said:

I'm not sure how that's possible. The feds don't kick-back the additional taxes they're collecting to the states, do they? They're separate financial streams.

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Calm down, reread Luthor's suggestion. He's pointing out that each state has the option of reducing the personal impact on those effected by the Federal loss of deductions, by reducing their own taxes. This has nothing to do with revenue streams, revenue sharing between the Federal government with the states or any other matters, all of which muddy the waters for effective discussion about these changes if included in the discussion, related or not, and should be discussed separately. They have all been and remain serious issues.

Essentially, this is an attempt to equalize Federal tax revenue collections regardless of geographic taxpayer location. When we understand the two basic deductions remaining for individual federal taxpayers have been local tax deductions and mortgage interest deductions, this is the remaining leg for eliminating all deductions, in the name of simplification of the tax code and leveling the playing field for the nation as a whole. Both simplification of the Federal tax codes and a level national field have been the targets since the Reagan administration.

Theoretically, underlying these concepts, is the theory that high tax states will have to adjust their own taxes to meet the leveled playing field, and take it on the chin with reduced state revenues, or they will lose citizens to states with lower taxes, especially higher earners. (I will not expound on this at the moment.)

I don't believe Luthor is passing judgment, and I certainly am not. Both of us are describing parts of what is happening here. That doesn't express agreement or disagreement. I don't believe anyone can argue with the complexity of our tax laws, the requirements for reporting income and determining individual taxes, as well as business taxes, as well the concurrent inequities that have developed simultaneously. For short form users, the differences will be negligible.

I don't know, yet, if this was the correct, most efficacious, most effective, most efficient, method for addressing the concerns of complexity and fairness of our tax codes. It may prove out, or it may prove a disaster, time will tell. However, it was time to do something rash to get the ball rolling and shut up the know nothings of congress who have offered no solutions of consequence, just more methods for increasing revenues, spending and debt. Everyone talks and that has been where it all ended. Now we are faced with a drastic move that should spur better solutions for Americans. Will that happen? Your guesses are as good as mine. We have a congress filled with misconception, ignorances, and outright lies. It is time for each of us to call those we elect to task. Speculating about results based on political partisan positions will accomplish nothing, neither will ad hominem attacks.

I am honestly telling you I don't how this will prove out, and neither do you. Only time will give us answers. Something had to get the ball rolling, now the ball is in everyone's field of play. There will definitely be some financial pain for many or at least some. Watch carefully, learn carefully, and participate in the process for bringing responsive changes, or lose your voice. Your choices to make.

I blame my dog. When we went out for an afternoon walk he responded to my threat for no more prime rib, more hamburger, by aiming at a tree and hitting me in the leg. This is war between us.

Keep in mind, I am in NYC, one of the highest if not the highest local tax venues in the nation. No one can say I am happy about any of this.

Lutherf said:

No problem.

The basic deduction for donating a car is $500. If the charity auctions the vehicle then they will give you a letter stating what the car went for and you deduct that amount. If they keep the car and use it then they'll give you a letter that cites whatever value they come up with. Don't count on getting KBB value or something like that for your donation.

That will be a 6 pack of Dogfish Head Palo Santo Maron, a 12 pack of Sam Adams or a couple of 30's of Hamm's light.

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Hamms?

Now that's old school!

Lutherf said:

No problem.

The basic deduction for donating a car is $500. If the charity auctions the vehicle then they will give you a letter stating what the car went for and you deduct that amount. If they keep the car and use it then they'll give you a letter that cites whatever value they come up with. Don't count on getting KBB value or something like that for your donation.

That will be a 6 pack of Dogfish Head Palo Santo Maron, a 12 pack of Sam Adams or a couple of 30's of Hamm's light.

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Take a check?

Rexedgar said:

Take a check?

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Yes, but I need it funneled through a series of shell corporations and made out to a stripper.

Lutherf said:

Yes, but I need it funneled through a series of shell corporations and made out to a stripper.

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Thanks for the info; sorta what I figured. VA. used to have an honor system when there was a private vehicle sale. You were left to
your consience as to what you paid for the used vehicle on a box on the rear of the original title. About 15 years back the state smartened up and used a used car database to establish the value of the vehicle. Sales tax issue and all. Our government steals from us and we try to claw some back. We get the government we deserve.......is that Hamm’s from the “Land of Sky Blue Waters?”

This thing is looking more complex than what I first made it out to be. It’s more a matter of reducing the charitable deduction by the tax benefit but only in some circumstances and subject to certain limitations.

Somehow or other this doesn’t feel like “simplification”.