U.S. Treasury readies tax rules on deductions for state charities

WASHINGTON (Reuters) – The U.S. Treasury said on Wednesday that it will soon propose regulations aimed at state measures intended to blunt the impact of a new Republican law that caps a longstanding federal tax deduction for state and local tax payments.

The Treasury and Internal Revenue Service said new rules will clarify federal authority on deductions contributions to state and local governments, including state-specified funds. The regulations will also help taxpayers understand the relationship between the federal deduction for charitable contributions and the new limit on so-called SALT payments, the agencies said.

The Republican-controlled Congress capped the federal SALT deduction at $10,000 in legislation President Donald Trump signed into law in December. Some high-tax states have responded with steps allowing local taxpayers to avoid the cap by instead making fully deductible charitable contributions to state entities.

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