California proposal to allow its residents to avoid the $10,000 tax deduction limitation

So the recent income tax simplification bill may have complicated things in yest another fashion.

California state senate Kevin de León introduced a bill allowing taxpayers to make a charitable donation to the California Excellence Fund instead of paying certain state taxes. They could then fully deduct that contribution from their federal taxable income rather than being limited to $10,000.

I’m pretty sure that charitable deductions to the state are already deductible at least in some circumstances, so this might be difficult to fight. And I don’t see how the federal government could disallow a state tax credit.


If they are getting something for it, the value of that incentive isn’t tax deductible. So a $1000 donation that earns a certificate worth $1000 off CA property taxes results in a net federal deduction of $0. CA Sen. de Leon is basically waving a giant “audit my constituents” flag at the IRS.

Not true necessarily in this case. Other states already allow tax credit for charitable deductions to various programs such as environmental or to support religious schools. See

Are you a tax attorney or accountant? One might suggest that such statements should have some qualifiers attached otherwise. :rolleyes:

I am not.

From IRS Pub 526, 2016 version

Sure he may be playing some loophole or grey area elsewhere. In theory a coffee cup in return to a donation to charity is suppossed to be decuted too.

The little bit I’ve seen / heard from Kevin de Leon has not left me impressed with his grasp of important details.

That’s the name he chose? I prefer the First Annual Montgomery Burns Award for Outstanding Achievement in the Field of Excellence.

Uh, really? That covers every business that has ever made a charitable donation.

No way is that enforceable, let alone considering the practical issues of auditing 25M Californians.

Did you read, the cite I gave. This doesn’t appear to be too gray. Other states are already doing this for other things. Apparently charitable deductions give you state credits as well. The point is the charity is not giving you anything for your contribution.

Was in a rush at that moment. A different cite which is in line with what I had seen before

Your cite seems to not cover any kind of quid pro quo in any of the plans mentioned. That it’s at least better reporting than I had seen which basically described a slam dunk for the IRS in court. The state is letting it count as a double deduction counting it when taxpayers bring over their federal agi and then letting them deduct it again on the state form. It’s trickier in this case since the intent it’s clearly to pay state taxes not increase donations to clearly charitable contributions.

I will step back to a judge will very likely be deciding and there is not a clear case for the proposed law.

I’m almost sure this is not true. I can’t check right now, but your federal Adjusted Gross Income is determined before charitable deductions so if your state starts with the AGI (as my state does), you would not be getting a double deduction.

Why should state or municipal taxes be deductible at the federal level? And I thought more taxes were a good thing?

As a general principle, it seems logical and fair that you should only be taxed on money that you actually receive, not some abstract theoretical number. So, if you’re being taxed by two entities, the second one should only tax you on what you have left after the first one takes its cut. In other words, either State taxes should be deductible from Federal, or Federal from State.

This sort of childish snark is why it’s hard to take right-wing banter seriously. Who has time to sift through confusion and gibberish hoping to find insight?

But, just in case your question was sincere, most of us would prefer a fair tax system.

25 million Californians aren’t going to try this. I’d be surprised if even 2 million did, but even then, throw a few of those in prison over it, and the numbers will dwindle the next year. That’s how this works.

Seems like California could allow a deduction on state taxes for any Federal taxes paid, and I doubt anyone outside of California would complain or even care.

Gee, I wonder why it wouldn’t be in the interest of the state to do that.

Well, obviously the problem is that states have historically had priority in taxing people as they see fit first, then the Federal govt takes its percentage of what’s left. I wasn’t suggesting a solution to the problem, just that there is some logic to the deduction in principle. Obviously what you say would just cut CA revenues by a quarter. But I guess this isn’t a good faith discussion anyway.

But in this case, the state is both the charity and the one giving the benefit, so it’s a separate case from giving to other charities.

Just like it’s not in the interest of the feds to five a deduction for state taxes paid.

Well, obviously the issue is really whether the states should have priority over the Federal government in taxing citizens. If all the states had the same tax rate, then it wouldn’t matter how the tax accounting was done in order to raise a given amount of revenue.