IRS Proposes Eliminating Charitable Deduction for Donations to State Tuition Tax Credit Programs

Tax Law Update

IRS Proposes Eliminating Charitable Deduction for Donations to State Tuition Tax Credit Programs

Yesterday, the IRS issued proposed regulations that could reduce or eliminate your Arizona dollar-for-dollar tax credit as a charitable deduction on your federal income tax return. If the proposed regulation is finalized as written, it will apply to tax credit contributions made after Monday, August 27, 2018. The proposed regulation will only impact the availability of the federal charitable contribution deduction. It will not affect your ability to take a credit against your Arizona state income taxes.

Arizona currently has five different state income tax credit opportunities:

• Public School
• Private School
• Military Family Relief Fund
• Qualifying Foster Care Charitable Organizations
• Qualifying Charitable Organizations
   

Below are links to the Arizona Department of Revenue web page describing the available tax credits and the new proposed IRS regulations:

• https://azdor.gove/tax-credits
• https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-19377.pdf

   

At this point, the regulations are only proposed. A comment period and public hearing will occur prior to the regulations becoming final. However, if the regulations are made final in their present form, then contributions made after August 27, 2018 – this coming Monday – will be affected.

If you have questions regarding the proposed regulations, please contact Steve Good or Sam Efird.