States’ Challenges to Federal SALT Deduction Cap Thrown Out (1)

The federal government defeated a legal challenge by New York, New Jersey, and Connecticut to a Treasury rule designed to curb state workarounds to the cap on state and local tax deductions.

The decision is a major blow to any state attempts for residents to donate to charity and earn equivalent credits on their state and local taxes, while also deducting the donation from their federal income tax. Under the upheld Treasury rule, those federal deductions are limited by the amount of credits they generate for state and local taxes—negating much of the tax benefit.

A different method used by ...