Endow Iowa Update

CFNEIA

July 2, 2019

We are fortunate to live in Iowa with generous residents who have invested in the quality of life we enjoy today through charitable giving. The Endow Iowa Tax Credit program, available through the Community Foundation, continues to provide additional tax benefits for qualified charitable gifts.

There are newly approved IRS regulations which could impact the federal deductibility of Endow Iowa charitable gifts. These regulations do not impact the federal tax returns of donors who utilize the standard deduction or have made an Endow Iowa qualified gift as an IRA charitable rollover but will affect those who itemize their deductions.

On June 13, 2019, the U.S. Treasury Department published a regulation titled “Contributions in Exchange for State or Local Tax Credits”. While this new regulation was finalized on June 13th, enforcement of the regulation impacts Endow Iowa qualified gifts made on or after August 28, 2018.

The regulation requires that federal charitable deductions are reduced by the value of any state tax credit received. For example, a taxpayer that makes a $100 charitable donation to an Endow Iowa fund would receive a $25 (25%) state tax credit. With the new regulation, when filing federal taxes, the taxpayer cannot deduct the entire $100 charitable donation as in the past, but only the difference between the donation and the state tax credit, or $75 in this example. Put another way, what was previously a $100 charitable tax deduction is now a $75 charitable tax deduction. There is an opportunity to deduct the full value of the gift if you have not reached the $10,000 SALT cap.

The effect of this change is different for all taxpayers. Due to the complex nature of this regulation, we recommend you consult your tax advisor to better understand its impact on your specific situation.

If you would like to learn more, please contact our development staff at info@cfneia.org or by phone at 319-243-1354.