Here’s How the New SALT Cap Regulations Work

The Internal Revenue Service has unveiled new regulations to stifle attempts by states to circumvent the 2017 tax act’s $10,000 limit on state and local tax deductions.

Here’s how the IRS’s proposed rules work, according to senior Treasury Department officials:

1. A federal charitable deduction would only be allowed to the extent a contribution to a charity exceeds the amount of state tax credit generated by the contribution.

For example, if a taxpayer makes a $1,000 contribution to a charity, and receives a 70 percent ($700) state tax credit, the taxpayer would only be able to claim a $300 ...