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Started By
Message
re: LA tuition donation tax credit
Posted on 7/29/18 at 9:49 pm to lsumed
Posted on 7/29/18 at 9:49 pm to lsumed
We are looking hard at this for some of our clients.
We know for a fact that LDR is going to require the amount of the charitable deduction to be an addback on LA Schedule E. On a $10,000 donation, that would increase your LA tax by $600. Not a huge issue, but something to consider.
Note: This is based on conversations many practicioners have had with LDR's policy people. I have not seen any published guidance.
I can also tell you that there is a significant concern that the IRS will consider the tax credit "a thing of value". Charitable contributions deduction must be reduced by items of value that are received from the charity. This wasn't an issue pre-2018 since really, even if there was an issue with the charitable deduction, the credit could have been taken as a tax payment... so it was just a matter of what Sch A line to use.
With the 10K Sch A tax limitation... all of these "work-arounds" are getting a very close look.
You might be able to sneak it through in 2018, so there is a small window.
Now, even if the IRS does eventually limit the deduction to 5%, you still get that... and you also get the satisfaction of knowing that your tax dollars are going to a mission you believe in, instead of being pissed away by Baton Rouge. That, by itself, may make this program popular!!
We know for a fact that LDR is going to require the amount of the charitable deduction to be an addback on LA Schedule E. On a $10,000 donation, that would increase your LA tax by $600. Not a huge issue, but something to consider.
Note: This is based on conversations many practicioners have had with LDR's policy people. I have not seen any published guidance.
I can also tell you that there is a significant concern that the IRS will consider the tax credit "a thing of value". Charitable contributions deduction must be reduced by items of value that are received from the charity. This wasn't an issue pre-2018 since really, even if there was an issue with the charitable deduction, the credit could have been taken as a tax payment... so it was just a matter of what Sch A line to use.
With the 10K Sch A tax limitation... all of these "work-arounds" are getting a very close look.
You might be able to sneak it through in 2018, so there is a small window.
Now, even if the IRS does eventually limit the deduction to 5%, you still get that... and you also get the satisfaction of knowing that your tax dollars are going to a mission you believe in, instead of being pissed away by Baton Rouge. That, by itself, may make this program popular!!
2
Posted on 7/30/18 at 8:37 am to LSUFanHouston
Very helpful. They are asking for half of donation by mid August, so this decision would need to be made soon. Are you recommending it for your clients? I doubt there will be any clarity from the IRS in the next few weeks..
Worst case scenario is you don't get the fed deduction on 95%, and you have slightly overpaid your LA taxes...for a good cause. Best case saves thousands. Seems worth the risk.
Worst case scenario is you don't get the fed deduction on 95%, and you have slightly overpaid your LA taxes...for a good cause. Best case saves thousands. Seems worth the risk.
Posted on 8/7/18 at 9:50 am to LSUFanHouston
Ok ---I am all over this!
Making my pledge today for my contribution.
I have worked with our CPA firm and two others---none knew the program existed until my call--and we are confident there is nothing Louisiana can do in 2018 to limit the credits without convening the legislature again. We are also pretty confident that the IRS will not limit this deduction because to do so would defeat the entire premise that 503Cs operate under. (How can you tell a charity that has been raising money all year that suddenly if their donors took the Louisiana credit the contributions are no longer deductible?) It may happen but IMHO the risk are low.
These program exists in different states but have statewide caps. One state has a $30 million cap that has already been reached in 2018 I am told.
It seems to me:
1) this is a no brainer for anyone with state income tax obligations over $10,000
2) this is a low cost, good thing for anyone wishing to help low income kids
Making my pledge today for my contribution.
I have worked with our CPA firm and two others---none knew the program existed until my call--and we are confident there is nothing Louisiana can do in 2018 to limit the credits without convening the legislature again. We are also pretty confident that the IRS will not limit this deduction because to do so would defeat the entire premise that 503Cs operate under. (How can you tell a charity that has been raising money all year that suddenly if their donors took the Louisiana credit the contributions are no longer deductible?) It may happen but IMHO the risk are low.
These program exists in different states but have statewide caps. One state has a $30 million cap that has already been reached in 2018 I am told.
It seems to me:
1) this is a no brainer for anyone with state income tax obligations over $10,000
2) this is a low cost, good thing for anyone wishing to help low income kids
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