Reuters: U.S. Treasury, IRS move to block states dodging tax deduction cap

Under the proposed rule, however, a New York taxpayer could not receive a federal charitable deduction for the portion of their donation to the fund for which they received a state tax credit, unless the credit was for 15 percent or less.

“If you make a donation of $100 and you get a big chunk of that back in state tax credits, say $85, you can’t go to the IRS and say I gave $100, I should be able to get a $100 deduction,” said Carl Davis, research director at the Institute on Taxation and Economic Policy, a nonpartisan think tank.

“You can only deduct the amount you actually sacrificed, that $15 that wasn’t already reimbursed,” Davis added. Read more

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