The Community Foundation of Greater Muscatine wants to make you aware of the newly approved IRS regulations which could impact the federal deductibility of your Endow Iowa charitable gifts. These regulations do not impact the federal tax returns of donors who utilize the standard deduction or have made an Endow Iowa qualified gift as an IRA Charitable Rollover but will affect those who itemize.
The regulation requires that federal charitable deductions are reduced by the value of any state tax credit received. For example, a taxpayer that makes a $100 charitable donation to an Endow Iowa fund would receive a $25 (25%) state tax credit. With the new regulation, when filing federal taxes, the taxpayer cannot deduct the entire $100 charitable donation as in the past, but only the difference between the donation and the state tax credit, or $75 in this example. Put another way, what was previously a $100 charitable tax deduction is now a $75 charitable tax deduction. You may deduct the full value of the gift if you have not reached the $10,000 tax cap by deducting the $25 as a state and local tax deduction. We recommend consulting with your tax professionals.
Thank you for the difference you make in our community through your philanthropic gifting.
Quick Guide to the Effects of Recently Finalized IRS SALT Regulations on the Endow Iowa Tax Credit
1. The new regulations were finalized on June 11, 2019 but they took effect on August 28, 2018 when they were first proposed.
2. They treat the tax credit as a non-deductible amount of the charitable contribution for federal taxes (ie: $100.00 contribution, $25.00 Iowa tax credit, $75.00 Federal charitable deduction)
3. The regulation was proposed due to the $10,000 limitation on State and Local Taxes with the 2017 tax reform act. Some high tax areas were setting up charitable reserve funds giving up to 95% tax credits.
4. If the donors SALT deduction is under the $10,000 limit they may use the non-deductible credit as a SALT deduction up to the limit (ie: $100.00 contribution with a $25.00 Iowa tax credit would provide for a $75.00 Federal charitable deduction, and a $25.00 federal SALT deduction).
Please click HERE for examples of effects of new rules.