The IRS issued a new regulation that directly impacts donors that participate in Pennsylvania EITC/OSTC programs.
For contributions made after 8/27/18:
– Donors are required to reduce the amount of their charitable contribution by any state tax credits received when completing their federal tax return on a dollar for dollar basis. Donors are no longer allowed to receive a federal charitable deduction equal to their contribution to the Pennsylvania EITC/OSTC program.
– Example: a taxpayer that gives $20,000 and participates in a two-year commitment will only be able to deduct $2,000 after subtracting their $18,000 tax credit from PA.
Donations made prior to August 27, 2018 are presumed to be fully deductible. Stay tuned, as final regulations are expected later this year to provide more detail on this matter.
Jenn Crawford, CPA