Taxpayer Reminder: Guidance on Charitable Contribution Deduction Limitations for Property Tax Payments
September 11, 2018
ROSELAND, N.J. — The New Jersey Society of Certified Public Accountants (NJCPA) is reminding taxpayers of guidance proposed by the U.S. Department of the Treasury and the Internal Revenue Service (IRS) in August that limits the amount that can be claimed as a charitable contribution deduction when the contribution results in a credit toward their property tax bill.
The proposed regulations were drafted to clarify the relationship between the federal charitable contribution deduction and the new $10,000 cap on deductions for state and local taxes enacted under the Tax Cuts and Jobs Act. New Jersey and several other high-tax states proposed that towns could establish charitable funds and provide a property tax credit to homeowners making contributions to those funds, allowing those taxpayers to claim a charitable contribution deduction on their federal tax return.
The Treasury and IRS proposed that a taxpayer who makes a payment or transfers property to an organization that receives tax-deductible contributions would have to reduce their charitable contribution deduction by the amount of any state or local tax credit he or she receives. In other words, if a taxpayer makes a $1,000 charitable contribution for which a 70-percent property tax credit is received, the taxpayer can only claim $300 as a charitable contribution deduction.
“New Jersey taxpayers have particular challenges. The proposed regulations do not help taxpayers as much as originally believed so residents need to be careful with their taxes and seek assistance from CPAs to determine what is disallowed from a charitable perspective,” said Ralph Albert Thomas, CPA (DC), CGMA, executive director and CEO of NJCPA.
Written and electronic comments on the proposed guidance must be received by the IRS by Oct. 11, 2018. A public hearing on the guidance is scheduled for Nov. 5, 2018. More information is available at federalregister.gov.
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The New Jersey Society of Certified Public Accountants, with more than 15,000 members, represents the interests of the accounting profession and advances the financial well-being of the people of New Jersey. The NJCPA plays a leadership role in supporting the profession by providing members with educational resources, access to shared knowledge and a continuing effort to create and expand professional opportunities. Visit njcpa.org.