A married couple isn’t entitled to education tax credits. For 3 tax years, the couple claimed refundable American Opportunity credits of $1,901, $1,893, and $1,000. The IRS disallowed them and the U.S. Tax Court agreed. The court noted that taxpayers bear the burden of proving their right to the credit, which is claimed for qualified tuition and related expenses. The taxpayers didn’t prove they were entitled. The court also found they hadn’t reported taxable income and were ineligible for other claimed tax breaks, so it upheld fraud penalties.
The attorneys general of CA, CT, NJ and NY have filed joint comments opposing proposed IRS regulations on the availability of federal charitable contribution deductions for taxpayers receiving a corresponding state and local tax (SALT) credit. The proposed regs block states and localities from setting up charitable funds to preserve the deductibility of property taxes in response to the limitation on the SALT deduction. The proposed regs would require taxpayers to subtract the value of any SALT credits that they receive from their charitable donation deductions.