WASHINGTON — The IRS will review whether or not the end run by New Jersey and other states around new tax laws, limiting the deduction on state and local taxes to $10,000, will be allowed.

Legislation signed by Gov. Phil Murphy would allow communities to create charitable funds that taxpayers would "contribute" to when making their payments. The new law does not cap charitable deductions, and taxpayers would receive a tax credit of up to 90 percent against their property tax bill, according to Murphy.

"The federal SALT deduction cap is a de facto fax hike on countless New Jersey households," Murphy wrote on his Twitter account the day he signed the legislation. "Our mayors will now have this tool to provide relief for our property taxpayers."

The IRS, however, said it will review that plan and others to "help taxpayers understand the relationship between federal charitable contribution deductions and the new statutory limitation on the deduction of state and local taxes."

"Taxpayers should also be aware the U.S. Department of the Treasury and the Internal Revenue Service are continuing to monitor other legislative proposals being considered to ensure that federal law controls the characterization of deductions for federal income tax filings," the IRS wrote in its statement.

Thirty-three states have adopted the charitable contribution to get around the new tax rules.

"Any type of elimination of state and local income tax deductions will have an impact on a state like New Jersey," Michael Hayes, an assistant professor of public policy at Rutgers University in Camden, told New Jersey 101.5 in April.

"People that are used to deducting their property tax and their income tax from their taxable income at the federal government level wouldn’t be able to do that anymore, which would be a potential hit to those households, especially high income households in New Jersey," Hayes said.

The cap of the property tax deduction would have an impact on the New Jersey housing market and create unfavorable conditions for both buyers and sellers.

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