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IRS to issue guidance on state efforts to circumvent tax-law provision

The Treasury Department and IRS announced Wednesday that they will issue guidance relating to blue states’ efforts to circumvent limits on state and local tax deductions under the GOP-backed tax law.

Under the new law, the state and local tax (SALT) deduction is capped at $10,000. The new limit has been a concern for elected officials in high-tax states such as New York, New Jersey and Connecticut, who worry that it will lead to an increase in their residents’ federal income taxes.

Politicians in blue states have proposed or enacted measures to provide workarounds to the cap on the SALT deduction. Blue-state politicians have noted that many states already have arrangements in which taxpayers get a credit against their state taxes for donations to private education, and the donations have been tax deductible.

The agencies also said that “taxpayers should be mindful that federal law controls the proper characterization of payments for federal income tax purposes.”

Original Story at The Hill.

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