Earlier this month, the IRS issued final regulations pertaining to Section 170. At stake was whether a taxpayer could subvert the $10K SALT deduction cap (not popular in California) by making a charitable contribution to a state or local charitable fund in exchange for a state or local income tax credit. The idea, essentially, being that you move your payment of state income taxes to a different part of Schedule A where you would avoid the aforementioned $10K limitation.
Predictably, the IRS did NOT love this scheme. They adopted the quid pro quo approach in their analysis, which basically means that they look to what the taxpayer is receiving for their "donation" to determine how much they can deduct. Essentially what they said is that because the taxpayer is receiving a real and immediate benefit for their donation, they would need to reduce the charitable donation by the amount of the state or local tax credit received. In other words, it means that the taxpayer would only get to write off a sliver of the donation if it didn't provide a dollar-for-dollar credit. Or, if they got a dollar-for-dollar credit, they'd get no charitable deduction. In either case, it nullifies any potential net tax benefit a taxpayer might hope to receive.
So, don't expect California, or whichever state you reside in, to move forward with a program to exchange charitable donations for state/local tax credits, because it just doesn't pencil out. Fortunately, there are many other tax saving strategies out there that more than mitigate the pain of the SALT Cap. Get in touch with us to see which strategies would make sense in your particular circumstance.
About Dark Horse CPAs
Dark Horse CPAs provides integrated tax, accounting, and CFO services to small businesses and individuals across the U.S. The firm was founded to save small businesses (and their owners) from subpar accounting and tax services and subpar client experiences. These small businesses are Dark Horses among their larger and more well-known competition. Being a Dark Horse CPA means advocating for small businesses by bringing them the tax strategies and accounting insights previously reserved for big business. Get a quote today.
share
Recent Article
Read All ArticlesFeb 9, 2018
Weird Tax Changes You Need to Know About
We are releasing a 2-part episode on Taxes and Beer about some of the weird tax changes that were included in the Tax Cuts & Jobs Act. We say "weird" because these changes don't fit a larger narrative, don't seem to appease any special interest groups, nor have any specifically articulated reason as to the why behind the change. Our opinion, as a firm, on these changes is that they were concession items to enable the projected budget deficit increase under the mandated 10 year threshold of $1.5 trillion. The question was likely, what can we change that would increase revenue and upset the smallest number of people? Nonetheless, taxpayers need be aware of these changes, as they will impact millions of Americans. The topics we cover on Part 1, with their respective promotional slogans, are:
- Alimony - "Make Divorce Messy Again"
- Moving Expenses - "Make Moving Expensive Again"
- Entertainment Expenses - Let's keep business in the office
- 100% deductible Meals (those provided for the convenience of the employer at work) - let's keep meals at the restaurant
- Miscellaneous Itemized Deductions (think Unreimbursed Employee Expenses) - Eh, miscellaneous is hard to spell
Tune in and keep an eye out for Part 2!
About Dark Horse CPAs
Dark Horse CPAs provides integrated tax, accounting, and CFO services to small businesses and individuals across the U.S. The firm was founded to save small businesses (and their owners) from subpar accounting and tax services and subpar client experiences. These small businesses are Dark Horses among their larger and more well-known competition. Being a Dark Horse CPA means advocating for small businesses by bringing them the tax strategies and accounting insights previously reserved for big business. Get a quote today.
Read Articles
Jan 14, 2025
Why It's So Hard to Find a Good Accountant and Who is Taking on New Clients?
It’s been plastered all over the Wall Street Journal, it remains the hottest topic of conversation in our industry, and it’s probably caused you quite a bit of pain…there are simply not enough accountants to properly serve the population of small businesses, entrepreneurs and individuals who need their services. The result is that this population has been chronically and increasingly underserved.
How did we get here? It certainly didn’t happen overnight. Rather, over decades. Over the past few decades, starting salaries for accountants have been mostly stagnant. In fact, after accounting for inflation and cost of living, the relative purchasing power of those salaries have declined substantially over the years. At the same time, the cost of getting a degree has only skyrocketed which has been made worse by the 5th year requirement added almost universally by all State Boards of Accountancy.
Adding more fuel to the fire is the working conditions that those in public accounting have faced. From long hours (in certain cases exceeding 100 hours) to a crushing amount of stress, to toxic work environments, there hasn’t been a lot of positives to report on by those in public accounting. In fact, many accounts of these horrific work experiences can be found on https://www.reddit.com/r/Accounting/ and https://www.goingconcern.com/.
As you might imagine, this has trickled its way down to undergrad accounting and business programs, and even further down the pipeline. It’s no surprise then that college students are choosing other careers and that those who might otherwise attend college to become an accountant are opting out and going into the trades.
The other obvious impact is that these terrible employment experiences are pushing people to quit not just their firm, but public accounting entirely. So, on one hand, you have fewer incoming accountants and on the other you have an increasing velocity of exits from the profession.
This is why you have likely had many sub-par experiences with accounting firms prior to Dark Horse. Most firms are stretched so thin that it’s a miracle they even get your tax return filed on time or finish your bookkeeping before the following month is over. Then, there’s just about nothing left over to actually add value through strategic tax planning, consulting and advisory, or Fractional CFO Services.
Why do you care about this? I’d like to say you shouldn’t. It’s not your problem. But it is a reality, and the reason Dark Horse CPAs can achieve outsized outcomes for their clients is because we pay people for the quality of their outputs (i.e. deliverables) vs. a stagnant salary with a requirement to work a ridiculous amount of hours.
As a result, the fees we charge might seem to be out-of-step with what you’re used to or otherwise expecting. We don’t apologize for this but rather wear it as a badge of honor that these fees enable us to drive more value per dollar spent than with any other accounting firm out there. Sure, we don’t always hit the mark exactly, but we’re a hell of a lot more likely to hit it than the clunky, outdated, inhumane accounting firms that cast an unflattering shadow on the profession we love.
We are Dark Horse CPAs and we exist to serve the Dark Horse small business and entrepreneur, bringing them the services and advisory previously reserved for their larger, incumbent competitors. We simultaneously exist to empower the Dark Horse Accountant in their quest to build a better career and drive more value to their clients. We believe in long-term relationships, and we believe you should work with an accountant who has a reason to stay around for the long haul, compounding their knowledge of your business for your benefit.
Read Articles
Get a personable & experienced CPA who will partner with you to achieve unparalleled results.
