Steve Wamhoff, senior fellow for federal tax policy at the nonpartisan Institute on Taxation and Economic Policy, gave the example that if a person gave $100 to a public radio station and received a mug in return, they would have to subtract the value of the mug when listing the deduction on their federal taxes.
“One would think that if the state government’s going to give you this tax credit that wipes out or dramatically reduces your income tax, that that’s a benefit that is worth clearly more than a coffee mug,” said Wamhoff, explaining that the IRS would have to decide whether the state government’s tax credit for the contribution makes it ineligible for federal deductibility.
Wamhoff also noted that while – as the report points out – other states provide tax credits for donations to public schools, this is not a binding precedent.
“The only approval on the IRS on that has been through an informal guidance,” Wamhoff explained. Read more