New SALT regulations impact charitable deductions on federal tax returns
Through charitable giving, caring community members have invested in the Dubuque region’s quality of life today and into the future. The Community Foundation of Greater Dubuque is pleased to provide these generous individuals with access to the Endow Iowa 25% State Tax Credit, which means contributions to the Community Foundation or its endowed funds cost donors far less than the value of their gifts.
As we continue to provide access to this charitable tax credit, a new IRS regulation (referred to as SALT) will impact the federal deductibility of Endow Iowa charitable gifts. Donors who take the standard deduction or make an Endow Iowa-qualified gift as an IRA charitable rollover, gift of grain or gift of livestock will not see an impact on their tax returns. The regulations will, however, affect those who itemize their deductions.
The U.S. Treasury Department published the regulation, “Contributions in Exchange for State or Local Tax Credits,” on June 13, 2019, and it impacts Endow Iowa-qualified gifts made on or after August 28, 2018.
Under the regulation, federal charitable deductions are reduced by the value of any state tax credit received. For example, someone who makes a $100 charitable donation to an endowed fund would receive a $25 (25%) state tax credit. When filing federal taxes, taxpayers can no longer deduct the entire $100 — only the difference between the donation and the state tax credit, or $75 in this example. In other words, a $100 charitable tax deduction becomes a $75 charitable tax deduction.
All taxpayers will be affected differently. Because of the regulation’s complexity, we recommend consulting your tax advisor to better understand its impact on you.
If you would like to learn more, please contact Amy Manternach, Vice President of Finance and Philanthropy, at 563.588.2700 or firstname.lastname@example.org.
This information is not intended as tax or legal advice. Please consult your tax professional or attorney for advice.