• Cole Lauterbach | Illinois News Network
Illinois lawmakers passed a workaround Thursday designed to help residents avoid federal caps on property tax deductions despite a warning the day before from the Internal Revenue Service.
The IRS issued a statement Wednesday that addressed efforts in some high-tax states to create laws to allow residents to continue to deduct state and local taxes in excess of $10,000 from federal taxes. The federal Tax Cuts and Jobs Act capped the amount of state and local taxes, or SALT, deductions taxpayers can write off on their federal taxes at $10,000. In high-tax states like Illinois, the cap is expected to pinch tax filers with more than $10,000 in property taxes who won’t be able to deduct above that.
In the statement, the IRS and U.S. Department of the Treasury said “taxpayers should be mindful that federal law controls the proper characterization of payments for federal income tax purposes.”
Illinois lawmakers weren't deterred. State Sen. Julie Morrison, D-Deerfield, said that the bill creates the “Illinois Education Excellence Fund.” Taxpayers who donate to the fund would get a 90-cent rebate on each dollar and could deduct the donation on federal taxes without being held to the $10,000 cap. The donation would go to public schools. The bill also would allow counties to create similar donation funds.
“It’s a bill that would do a lot to help property tax relief in the state of Illinois,” Morrison said.
The SALT workaround bill passed with a sole opposition vote from Sen. Jim Oberweis, R-Sugar Grove.
“The federal tax bill was a trade-off of legislation that would bring down overall rates in return for which it had to eliminate some deductions,” Oberweis said.
He added that the IRS will likely issue an opinion that the workaround doesn’t qualify as a charitable deduction.
“They cannot let states pull tricks like this to try to get around the law,” he said.
The bill must pass a House vote before it’s sent to Gov. Bruce Rauner.