Join Early Retirement Today
Closed Thread
 
Thread Tools Search this Thread Display Modes
States responses to IRS tax caps
Old 01-03-2018, 11:09 AM   #1
Thinks s/he gets paid by the post
 
Join Date: Jun 2004
Location: Diablo Valley (SF Bay Area)
Posts: 1,610
States responses to IRS tax caps

Now that the max deduction for SALT + property tax has been capped at 10k some states are looking at an ingenious loophole:
Quote:
"According to the IRS, donations to the following entities are tax-deductible, so long as they do not benefit any specific individual: Churches, synagogues, temples, mosques, and other religious organizations. Federal, state, and local governments, if your contribution is solely for public purpose."

Charitable Contributions - FindLaw
California is among them, look for NY & NJ to follow suit. The idea is that non-designated charitable contributions to FTB can be used to offset state income tax ..... and the dance goes on
__________________

gayl is offline  
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-03-2018, 11:15 AM   #2
Thinks s/he gets paid by the post
 
Join Date: Nov 2015
Posts: 1,675
Maybe they could figure out how to actually reduce costs instead of how to game the system.
__________________

bobandsherry is offline  
Old 01-03-2018, 11:17 AM   #3
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 3,922
IANAL, but it would seem to me that if a contribution to my state government in turn reduced my state income tax liability, it would not count as a deductible contribution for a public purpose.

If I donated some money to reduce my state's overall debt and it wasn't credited to me personally, sure, that would be a deduction for me. But I doubt that states could function successfully on a "general tip jar" approach to their finances.

I can understand the motivation of those states to try to address the current situation somehow, even though I think this particular dog won't hunt.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline  
Old 01-03-2018, 11:21 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Brat's Avatar
 
Join Date: Feb 2004
Location: Portland, Oregon
Posts: 6,359
Run that by me again. What is FTB?
__________________
Duck bjorn.
Brat is offline  
Old 01-03-2018, 11:44 AM   #5
Full time employment: Posting here.
misanman's Avatar
 
Join Date: Apr 2008
Posts: 735
Normally, value received must be subtracted from a charitable contribution. Credit against a tax owed seems clearly to be value received. I can't imagine that this kind of proposal would get by even casual scrutiny.
misanman is offline  
Old 01-03-2018, 11:53 AM   #6
Thinks s/he gets paid by the post
USGrant1962's Avatar
 
Join Date: Dec 2016
Location: DC area
Posts: 1,034
They could lower their tax rates and ask everyone to voluntarily contribute the difference. I'm sure that will work
__________________
FI and Semi-ER March 24, 2017
Consulting to stay engaged

"All models are wrong, some are useful." - George Box
USGrant1962 is offline  
Old 01-03-2018, 12:21 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 24,202
Quote:
Originally Posted by SecondCor521 View Post
IANAL, but it would seem to me that if a contribution to my state government in turn reduced my state income tax liability, it would not count as a deductible contribution for a public purpose.

If I donated some money to reduce my state's overall debt and it wasn't credited to me personally, sure, that would be a deduction for me. But I doubt that states could function successfully on a "general tip jar" approach to their finances.

I can understand the motivation of those states to try to address the current situation somehow, even though I think this particular dog won't hunt.
+1 with misanman..... if you make a contribution and receive something in return, then the value of what you receive in return is deducted from the contribution and only the excess is deductible.

For example, if I give $500 to a university and receive game tickets that have a value of $300, only $200 is deductible.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...target 65/35/0 AA
pb4uski is online now  
Old 01-03-2018, 12:23 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Jun 2004
Location: Diablo Valley (SF Bay Area)
Posts: 1,610
Quote:
Originally Posted by Brat View Post
Run that by me again. What is FTB?
FTB = Franchise Tax Board .... the taxing department for California

The state of California does not track the donations that you make to individual departments or services. Such as the the Peace Officers Association or child welfare. It is up to the individual to do the tracking. So I imagine if this goes through that it will be up to the individual to prove that they actually made that contribution. Yes we have a high income tax but we've got a fairly low property tax date as verified by other people in Wisconsin and the like. The purpose behind that is to guarantee that senior's once they stop working can remain in the family home. And not have to sell it because property taxes have gone through the roof. I cringe when I see what people in Kenosha Wisconsin are paying for property tax. That's outrageous!

And USA taxes are lower than other western countries (waiting for porky again)
gayl is offline  
Old 01-03-2018, 12:33 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Feb 2012
Posts: 1,311
Yeah, our local Science Center had their big gala reception, $75 each. Normally would deduct it all. This year about a month or two after got a nice letter saying thanks, the charitable deduction was worth ~$98 (for the two of us). Hey, we didn't drink $52 worth of beer! It honestly was a nicely done affair. Just never received an after the fact deductibility statement before.
H2ODude is offline  
Old 01-03-2018, 12:57 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Apr 2011
Posts: 2,678
I still don't understand why where you choose to live should impact your Federal tax obligation. Please splain.
gerntz is online now  
Old 01-03-2018, 01:44 PM   #11
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 4,636
Quote:
Originally Posted by gerntz View Post
I still don't understand why where you choose to live should impact your Federal tax obligation. Please splain.


As I understand this, it's because state and local income taxes predate imposition of the permanent Federal Income tax in 1916. Deductability iwas seen as a protection against double taxation, something more highly regarded at the time. Even more significantly it was to limit the Fed Gov't from taxing at such a high rate that nothing would be left for the state to collect.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline  
Old 01-03-2018, 02:39 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 7,734
Quote:
Originally Posted by gerntz View Post
I still don't understand why where you choose to live should impact your Federal tax obligation. Please splain.
If you live in Puerto Rico, your federal tax obligation is zero. Unless you are a Federal worker.

(please correct me if I'm wrong, as this subject is hard to find out about. Otherwise everyone would move there )
Sunset is offline  
Old 01-03-2018, 02:52 PM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 21,963
Quote:
Originally Posted by gayl View Post
FTB = Franchise Tax Board .... the taxing department for California

The state of California does not track the donations that you make to individual departments or services. Such as the the Peace Officers Association or child welfare. It is up to the individual to do the tracking. So I imagine if this goes through that it will be up to the individual to prove that they actually made that contribution. Yes we have a high income tax but we've got a fairly low property tax date as verified by other people in Wisconsin and the like. The purpose behind that is to guarantee that senior's once they stop working can remain in the family home. And not have to sell it because property taxes have gone through the roof. I cringe when I see what people in Kenosha Wisconsin are paying for property tax. That's outrageous!

And USA taxes are lower than other western countries (waiting for porky again)
What does any of this have to do with the $10K SALT cap for 2018?

Can you give an example? I agree with others, what you might be trying to say will not work - you can't make a charitable contribution and have it offset another expense (like State Income tax or local property tax), and still call it a charitable deduction.

What are you trying to say?

-ERD50
ERD50 is offline  
Old 01-03-2018, 03:02 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 21,963
Quote:
Originally Posted by gerntz View Post
I still don't understand why where you choose to live should impact your Federal tax obligation. Please splain.
Well, here's one view point - and I'm not getting political, just explaining one way it can be looked at. Whether you agree or not is fine, but it is an 'explanation':

Look at it from a "revenue neutral" view - the Feds will collect $X in Fed Income Tax (FIT), one way or the other. If you live in a State with high income and property taxes, we can assume that you get something in return for it (since you voluntarily live there). Might be extra services, might be quality of life - whatever (or in IL, crooked politicians ). OK?

So if you are allowed to deduct that on your FIT, in a revenue neutral setting, more taxes must be collected from people in other States to make up the difference. Those people's view could be that they are subsidizing your lifestyle (or local crooked politicians ).

Or maybe that's what you meant? I guess upon re-reading, maybe you are saying we shouldn't get to deduct any local taxes? I guess it depends on which way you view "impact"? Did you mean by giving a deduction for local taxes in the first place, or by limiting the deduction now?

-ERD50
ERD50 is offline  
Old 01-03-2018, 04:30 PM   #15
Thinks s/he gets paid by the post
 
Join Date: Feb 2012
Posts: 1,311
Wow. Just had a flashback thought. Worked in local government, and "user fees" were equated with ad valorem taxes, because both were collected by local governments (most predominantly for water and sewer, some solid waste). FWIW we in water and sewer were always frustrated that the Finance departments would try to game our charges for things like accounting, fleet maintenance, legal etc because our user fees brought in cash that could be used to support things like police, fire, etc. That, and it was easier to push us out in front to ask for more water and sewer charges than raise taxes. Just my take on history, please no flames.

Invariably as new things come up (think solid waste, recycling, stormwater management) those of us in the business of it preferred the revenue stability and avoided fights with other services like fire, police, libraries, etc.over tax revenue. Fairly accounted for, it was (relatively) easy to explain that look, by state law we now have to provide recycling. Many cities would do it with a user fee tacked on to water/sewer/solid waste bill. And invariably, some would howl that it should be paid with taxes so as to be tax deductible. Last city I worked for had a $5 a month solid waste fee that they DROPPED partly for this reason, which I thought was unwise. Many cities initiated stormwater utility enterprises to care for stormwater; something federal law mandated many many new requirements for. One city I worked for got creative and when solid waste costs went up in late 80's initiated something really new: non-advalorem line item charge on tax bill for...solid waste. Think it was about $100 annual. As the mayor who promoted it approached defeat in an election it was removed. Anyway, part of the argument was it was a user fee but tax deductible.

All of which is random recollections of someone who saw many fights as moves were made to move charges from user fees to federal tax deductible local taxes. Or create new user fees to relieve general funds of expenses without raising local taxes. So now since many fewer would be able to deduct local tax will we see a resurgence of various user fees that were dropped in favor of tax deductible ad valorem taxes? Just glad I'm not in those fights any more!
H2ODude is offline  
Old 01-03-2018, 04:37 PM   #16
Thinks s/he gets paid by the post
 
Join Date: Jun 2004
Location: Diablo Valley (SF Bay Area)
Posts: 1,610
Quote:
Originally Posted by ERD50 View Post
What does any of this have to do with the $10K SALT cap for 2018?

Can you give an example? I agree with others, what you might be trying to say will not work - you can't make a charitable contribution and have it offset another expense (like State Income tax or local property tax), and still call it a charitable deduction.

What are you trying to say?

-ERD50
https://www.eastbaytimes.com/2018/01...-deductions-3/
gayl is offline  
Old 01-03-2018, 04:52 PM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 15,310
Quote:
Originally Posted by gayl View Post
FTB = Franchise Tax Board .... the taxing department for California

The state of California does not track the donations that you make to individual departments or services. Such as the the Peace Officers Association or child welfare. It is up to the individual to do the tracking. So I imagine if this goes through that it will be up to the individual to prove that they actually made that contribution. Yes we have a high income tax but we've got a fairly low property tax date as verified by other people in Wisconsin and the like. The purpose behind that is to guarantee that senior's once they stop working can remain in the family home. And not have to sell it because property taxes have gone through the roof. I cringe when I see what people in Kenosha Wisconsin are paying for property tax. That's outrageous!

And USA taxes are lower than other western countries (waiting for porky again)

I have a sister who just bought a house in Wisconsin and when she got the property tax bill she kept asking 'is this it?'... she said it is less than half of what she pays here...
Texas Proud is offline  
Old 01-03-2018, 05:04 PM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2011
Posts: 6,161
Quote:
Originally Posted by USGrant1962 View Post
They could lower their tax rates and ask everyone to voluntarily contribute the difference. I'm sure that will work
They do that in Mass. You can make an additional tax payment if you felt that the current rate is too low (as many felt it was). You just check a box on your state tax form I think.
But only a small fraction of taxpayers actually do take part and pay more...like under 100 families IIRC.
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is offline  
Old 01-03-2018, 05:04 PM   #19
Thinks s/he gets paid by the post
38Chevy454's Avatar
 
Join Date: Sep 2013
Location: Cincinnati, OH
Posts: 2,308
Makes no sense, how would you "prove" to CA that you actually paid your correct amount of state taxes due? Because you don't claim it as state taxes, but rather as charity (now that is a loaded question, taxes being charity). If you need to validate the amount, then it becomes a matter of record that you paid taxes equivalent in that amount.

I agree that it seems an impossible question to actually ask the high tax states to actually reduce spending.

If anyone in CA actually wants to pay MORE in taxes to the state, go ahead. I agree you could deduct the additional amount you feel obligated to pay over the required amount.
__________________
The advice we're giving you is invaluable, that's why it's free
Experience is a good teacher, but the tuition can get expensive real fast

Semi-Retired 7/1/16: working part-time (60%) for now [4/24/17 changed to 80%]
Retired Aug 2, 2017; age 53
38Chevy454 is online now  
Old 01-03-2018, 05:19 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 21,963
That article is a mess. Gotta be careful here, it's a political Porky land-mine.

But as we said, if you make a "charitable deduction", but it offsets your tax payment, that is NOT gonna fly with the IRS. Never has, and probably never will.

So go ahead an make a charitable contribution to the State of CA - if you are in a 25% tax bracket, and have already met the $24,000 standard deduction for MFJ, or $12,00 single, you'll get 25% of your contribution returned in a lower Fed tax bill (but you still have to pay CA their taxes). What a deal!

Quote:
The average state and local tax deduction for Californians who itemize was $22,000, according to the state Department of Finance. The new federal law caps that deduction at $10,000, less than half that amount.
But for MFJ, they get a $24,000 standard deduction, so many will benefit if that is higher than what they itemize. It's not all downside, but that's all the article spins.

I didn't follow the rest of it, seemed pretty convoluted, and probably not worth the effort to decode, based on what I did follow.


-ERD50
__________________

ERD50 is offline  
Closed Thread


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Health Insurance Caps maddythebeagle Life after FIRE 10 09-02-2005 01:13 PM
Reposting original and Responses embarking FIRE and Money 6 06-08-2004 11:19 AM
The rest of Responses to embarking embarking FIRE and Money 3 06-07-2004 03:05 PM

» Quick Links

 
All times are GMT -6. The time now is 10:07 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.
×