January 30, 2018 | Number of The Day
Percentage of CPAs who say IRS won’t okay NJ property-tax maneuver

After recent changes to the federal tax code put a $10,000 cap on deductions for state and local taxes, Gov. Phil Murphy and U.S. Reps. Josh Gottheimer and Bill Pascrell proposed using property-tax payments as charitable contributions to help New Jersey homeowners get around the cap and maybe take a lesser hit when paying their federal taxes.

Unfortunately, that strategy is highly unlikely to work, if a New Jersey Society of CPAs’ poll is anything to go by: Of 828 certified public accountants who were polled this month, more than 70 percent said the maneuver would not pass muster with the Internal Revenue Service.

The accountants pointed out that since taxpayers would receive a benefit from their charitable donation, such as a reduction in their property taxes equal to the amount of their donation, it would not qualify as a contribution. Others warned that the strategy might lead to an increased risk of audit. Some also doubted the IRS would grant a 501(c)(3) status to the proposed creation of related charitable trusts.