1. State and Local Taxes (SALT)
NJ League of Municipalities

2. Economic Impact from (DLGS) Local Charitable Funds Regulation
According to the nonpartisan Tax Policy Center, the Federal government’s capping of the SALT deduction to $10,000 results in New Jersey taxpayers experiencing an average per capita loss of $630

3. What is a Deductible Charitable Contribution?
Definition
What is a Deductible Charitable Contribution?
A deductible charitable contribution is a donation or gift made to a qualified organization. The donation must be made voluntarily and with no expectation of any substantial reward or benefit.
Pursuant to NJAC 5: , a municipality or county shall not make representations to donors or prospective donors concerning Internal Revenue Service treatment of donations made to a charitable fund, and donors shall sign such an acknowledgement when making a charitable donation.

4. IRS Proposed Regulation
On August 23, 2018, the Internal Revenue Service (IRS) proposed new regulations under section 170 of the Internal Revenue Code regarding the treatment of payments and property tax transfers under state and local credit programs. The proposed IRS regulations would limit the amount that a donor could claim as a charitable donation against Federal income taxes to only the portion of the donation not credited toward the donor’s state and local tax obligation.

5. IRS Proposed Regulation
However, the proposed IRS regulations include an exception or “safe harbor” provision wherein a donor may claim the full amount of their donation as a charitable deduction against Federal income taxes if the donor receives a credit of no more than 15 percent or some other lesser amount against state and local taxes.

6. IRS Proposed Regulation
Pursuant to a February 4, 2011 Memorandum from the IRS Office of the Chief Counsel (No ), a payment of cash in the form of a charitable contribution to a state or local agency for which the taxpayer is entitled to a transferable state tax charitable credit is a proper deduction pursuant to section 170 of the Internal Revenue Service Code.

7. Tax Rate Changes – Illustrating Married, Joint
2018
2017
2018 Base Tax +%
Up to $
2017 Tax
+ / -
10%
19,050
1,905
12%
77,400
1,925
(20)
8,907
22%
165,000
10,828
(1,921)
28,179
24%
315,000
33,085
(4,906)
64,179
32%
400,000
79,167
(14,988)
91,379
35%
600,000
107,217
(15,838)
161,379
37%
182,572
(21,193)
2017 Base Tax +%
Up to $
2018 Income
2017 Tax
10%
18,650
1,865
15%
75,900
19,050
1,925
10,453
25%
153,100
77,400
10,828
29,753
28%
233,350
165,000
33,085
52,223
33%
416,700
315,000
79,167
112,728
35%
470,700
400,000
102,217
131,628
39.4%
600,000
182,572

8. Tax Changes
Doubles Standard Deduction, Married-Joint from 12,000 to 24,000
Eliminates Personal Exemptions - $4,050 each
Itemized Deductions
Decreases mortgage loan cap from $1 million to $750,000 for interest
Increases cap on charitable contributions from 40% to 60% of AGI
Caps State and Local Tax (SALT) at $10,000
Medical Expenses now in excess of 7.5% of AGI (down from 10%)
Eliminates Moving Expense
Eliminates Casualty or Theft Loss
Eliminates Tax Preparation Expense
Eliminates Unreimbursed Employee Travel Expense & Home Office Expense

9. Tax Changes Tax Credits
Child Tax Credit (under 17 years old) increased from $1,000 to $2,000
New $500 Tax Credit for non-child dependents (including parents)
Individual Health Care Tax Penalty eliminated – in 2019
Eliminates the Tax Deduction and Income Reporting for Alimony
Only if Divorce agreement is finalized after December 31, 2018
Alimony Revenue/Expense is grandfathered for existing agreements

10. SALT Impact on Small (or Large) Businesses
State and Local Taxes (SALT) are Business Expenses that remain a FULL deduction on the Corporate Tax Return or on Schedule C for the Sole Proprietor

11. Married, Joint Return (4 dependents)
2018
2017
Taxable Wages
150,000
Personal Exemptions 4,050 each)
Eliminated
16,200
Standard Deduction (12,000 in 2017)
24,000
N/A
Itemized Deductions
None
27,300
Mortgage Interest 3.5%)
7,000
Property Taxes (NJ avg = 8,500)
12,000
NJ Income Tax
6,000
SALT Limitation
(8,000)
Unreimbursed Business Expense - mileage
1,300
Donations
1,000
Taxable Income
126,000
106,500
Tax
19,599
18,102
Child Tax Credit
2,000
Non-Child Dependent Credit
500
Net Tax Liability
17,099
17,102
Tax Reduction in 2018 3