IRS Squashes New York's Attempt To Work Around Trump's Tax Law

On Tuesday, the IRS issued final regulations that put a stop by plans by New York and New Jersey to try to work around Trump's 2017 tax law to save residents' State And Local Tax deductions, or SALT.

Trump's tax law, known as the Tax Cuts and Jobs Act of 2017, capped SALT deductions at $10,000 -- much lower than what it used to be. It was seen as an attack on states like New York, New Jersey and California, which typically have higher taxes. This led to Business Insider naming Long Island the worst place to buy a home because of the law.

"By finalizing this rule, the federal government is continuing its politically motivated economic assault on New York -- an assault that started with President Trump and his allies in Congress and is now being advanced by the IRS," said New York Gov. Andrew Cuomo. "The IRS should not be used as a political weapon. The regulations promulgated today lack any basis in the law, upend decades of precedent without authorization from Congress, and target programs established by New York and other states to incentivize charitable contributions."

To help ease the burden on taxpayers, New York passed a law that would allow taxpayers to get back much more for charitable donations. It allowed municipalities to set up charitable reserve funds that could refund taxpayers up to 95 percent of a charitable donation.

Under the new regulations the IRS passed, which go into effect in August, anyone making tax-deductible donations to a charity must reduce their federal deduction by the amount they get back from the state, reducing the deduction taxpayers would otherwise receive.

"New York already sends $36 billion more to Washington than we get back every year. And thanks to the Republicans' SALT cap, New Yorkers are being used as ATMs, footing an additional $15 billion each year that will be redistributed to red states and corporations," Cuomo said. "In response to this economic attack, we crafted a new charitable contribution program that fully comports with long-standing legal precedent and principles of federal tax administration. We will pursue all options, including litigation, to resist this attack on our state and our taxpayers."