Govt acts to stop high-tax states from skirting $10K cap

August 23, 2018 - 3:33 pm

WASHINGTON (AP) — The Trump administration has laid down rules aimed at preventing residents in high-tax states from avoiding a new cap on widely popular state and local tax deductions. The action over the new Republican tax law pits the government against high-tax, heavily Democratic states in an election-year showdown.

The Treasury Department's newly released rules target moves by states like New York, New Jersey and California — where residents could see substantial increases in their federal tax bills next spring because of the $10,000 cap. A dozen states, most of them predominantly Democratic, have taken or are considering measures to get around the cap, mostly using deductions for charitable donations.

The new rules' limits also apply to many other states that already have charitable funds offering tax breaks.

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