For a long time, taxpayers in Connecticut have been able to fully deduct state and municipal tax payments on their federal returns. Law changes, which took effect in 2017, ended that tax benefit for the time being. As such, the state of Connecticut created a workaround, which allowed residents to make charitable contributions to local organizations so they can claim higher deductions on their federal returns. While this seems a reasonable solution to the problem, the Internal Revenue Service responded by saying such contributions could not be deducted.
According to a recently published article, the Attorney General filed a lawsuit in federal court seeking a rule change. To goal is to walk away from court proceedings with the right to allow Connecticut residents the ability to claim full deductions on charitable contributions that they make toward local organizations. This would help numerous residents of the state reduce their tax burdens.
Connecticut is not the only state that has tried to use this workaround. It is also not the only state to file suit over the current deduction limitations. Only time will tell how the courts decide to rule on this matter.
What can Connecticut residents do to reduce their tax burdens while the details over this wanted tax benefit is being litigated? They can make sure they are filing correctly and on time. They can make sure to address any errors in a timely fashion. Finally, they can seek assistance if they find themselves facing a tax-related issue. No one has to go up against the IRS alone.