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New IRS rule on tax deductions hurts New Jersey, other blue states, Murphy says

August 24, 2018

New Jersey Governor Phil Murphy speaks to reporters in June. On Friday, he said a new IRS rule that prevents New Jersey from using a workaround to the new federal tax law will hurt taxpayers.

By Staff

The IRS ruling that would prevent New Jersey and other states from using a potential workaround to the new federal tax law is targeted at heavily Democratic states and is a “regulatory overreach,” Gov. Phil Murphy said Friday. He vowed to fight it.

The IRS rule, released Thursday, would prevent states from using strategies to circumvent a new $10,000 cap on deductions for state and local income taxes. New Jersey legislators passed a law in May that would allow counties, municipalities, and school districts to establish charitable foundations to which residents could make payments instead of paying property taxes. The charitable contributions could then be counted as deductions on their federal taxes.

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