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Treasury Finishes Rules Ending Blue-State Tax-Cap Workarounds

Regulations effectively nullify laws passed in some states to skirt $10,000 cap

WASHINGTON—The Treasury Department released final rules that shut down a tax-planning strategy for residents of high-tax states, nixing a workaround that could have helped New York, New Jersey and Connecticut residents skirt the new cap on state and local tax deductions.

The regulations effectively nullify state laws passed in response to the 2017 tax law and pinch similar programs in Georgia, Arizona and elsewhere that predate the federal tax changes and benefit private schools, rural hospitals and other charities. The rules...