Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Thursday, December 6, 2018

The SALT Work-Around: Shaken Not Stirred

IrsThe Tax Cuts and Jobs Act (TCJA) imposes a $10,000 cap - $5,000 if married filing separately - on the amount of state and local taxes (SALT) a taxpayer can deduct. This was effective on January 1, 2018, shortly after the Act was passed. Tax advisors tax advisors weighed pre-paying 2018 obligations in 2017 to get around it, but this was foiled when it was clarified that payments in 2017 for 2018 obligations would be treated as if they were made in 2018.

Now, taxpayers in high tax states are gearing up for round two of the caps.

  • Legislators in states such as California, Connecticut, Illinois, New York, and New Jersey foresee a decline in property values as well as wealthy taxpayers leaving those states, and are currently formulating "work-arounds."
  • Some states are considering establishing state and local trust funds to take contributions for the support of public services. A taxpayer would then receive a state tax credit against SALT obligations.
  • Then the taxpayer would use the amount of the state trust fund contribution as a federal charitable income tax deduction to “work-around” the SALT limit.


  • The SALT limit is a central part of TCJA  to offset the inherent loss of federal income tax revenue built into other TCJA provisions.
  • Work-arounds have been described as  “an attempt to thwart the SALT limitation” and “a mere substitute for taxes that would have to be paid anyway.”
  • The IRS is doubling down, recently stating its intention to propose regulations addressing the federal treatment of payments made in return for a state tax credit.

See Susan P. Rounds, The SALT Work-Around: Shaken Not Stirred, NAEPC Journal of Estate & Tax Planning, Issue 29, July, 2018.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.


Current Affairs, Estate Planning - Generally, Income Tax, New Legislation | Permalink


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