California Lawmakers Eye Loopholes Around Fed Tax Deduction Limits

January 04, 2018

CBS SF Bay Area
By Len Ramirez

SAN JOSE (KPIX 5) — Democrats in Sacramento are exploring ways to help Californians save money by creating a loophole around deduction limits that are part of the new federal tax law.

The recently enacted law caps the deduction for state, local and propertytaxes at $10,000.

When President Trump signed his new tax plan into law, Democratic lawmakers say it dealt an especially heavy blow to California taxpayers by putting a cap on the state tax write-off.

“All of the wealthy people are benefitting from this, and in California — because of our high taxes — we will be penalized severely by this tax act in Washington. And we want to change that,” said State Sen. Jerry Hill from San Mateo.

Californians pay some of the highest state and local taxes in the nation. But the cap on state tax deductions in President Trump’s new tax plan means many will pay a lot more than the $10,000.

In fact, about a third of Californians claim around $18,000 a year.

A new bill introduced Thursday would do an end-run around the federal law by allowing Californians to pay their state taxes as charitable donations through a newly created fund called “California Excellence.”

That would allow taxpayers to deduct the entire amount paid to California from their federal taxes.