Source: https://www.districtofcolumbiataxattorney.com/articles/irs-responds-to-states-attempts-to-circumvent-salt-cap/
Timestamp: 2020-08-06 10:29:14
Document Index: 284784920

Matched Legal Cases: ['§164', '§164', '§164', '§164', '§164', '§164', '§11042']

IRS Responds to States’ Attempts to Circumvent SALT Cap | Frost Law | Washington DC
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On May 23, 2018, the IRS issued Notice 2018-54,[1]making it abundantly clear that when it comes to state efforts to circumvent the recently enacted state and local tax (SALT) deductions cap, “taxpayers should be mindful that federal law controls the proper characterization of payments for federal income tax purposes.”
Section 164 of the Internal Revenue Code (IRC) lists the following four categories of taxes that may be deducted whether or not the taxpayer has a trade or business or for-profit activity: (1) state and local, and foreign, real property taxes,[2](2) state and local personal property taxes,[3](3) state and local, and foreign, income, war profits, and excess profits taxes,[4]and (4) the generation-skipping transfer tax imposed on income distributions.[5]
Beginning in 2018 and continuing through 2025, the 2017 Tax Cuts and Jobs Act (2017 Act)[6]significantly limited the applicability of §164. The 2017 Act added §164(b)(6) which disallows the deduction of foreign real property taxes and caps an individual’s deduction for the total amount of SALT paid during the calendar year to $10,000 ($5,000 for a married individual filing a separately). Thus, any SALT payments exceeding the cap are not deductible.
If you need assistance with state and local tax issues, please contact Frost Law today at 410-497-5974.
[1]2018-24 I.R.B. __ (June 11, 2018).
[2]§164(a)(1).
[3]§164(a)(2).
[4]§164(a)(3).
[5]§164(a)(4).
[6]Pub. L. No. 115-97, §11042.