On Nov. 9, 2020, the Internal Revenue Service issued Notice 2020-75. For the first time, the notice approves of one of the techniques that states have used to help taxpayers avoid the $10,000 cap on the deduction of state and local taxes. However, that technique, involving shifting the tax to a pass-through entity, such as a partnership or S corporation, is only available to owners of businesses, not employees. The result may be that a cap that was designed to put a limit on the SALT deduction of wealthier taxpayers may now be able to be avoided by some of those same taxpayers. It is likely that this notice and expected regulations to follow could add to the movement to repeal or modify the cap.
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