It looks like an easy thing to do - donate a car to a charity you support, and get a tax break in the deal. Until 2005, it actually was almost that simple. Today, the rules have changed a bit, large in response to a report by a Government Accounting Office That the total lost tax revenue from over-valued vehicles at more than $ 650 million in the year 2000 .
So, should you still donate your car to charity? Absolutely. But there are caps on what you can claim:
$ 500 Limits
Generally speaking, there is a $ 500 value threshold for this that donated car can not be worth more, but it is not that that is it, you & # 39; ll have to do some extra documentation. (This threshold applies to planes and boats as well as cars.
Valuation Ceilings
If your car has a fair market value of more than $ 500 (as determined by the like like Kelley Blue Book), and the charity that accepted it then turns around and sells it, you can not claim more than their selling price. - You donate a hatchback worth $ 1,000 and the charity sells it for $ 750. You can not claim more than $ 750 as a deduction.) In addition, the charity has to provide written documentation of the donated vehicle & # 39; s IRS- permitted deduction within 30 days of accepting the car, or within 30 days of selling it if they do so.
Below-Market Resale
You can still be able to give the full $ 500 even if your car was sold for only $ 250. Again, the charity in the must must give you documentation, this time that the sale or gift was to a needy person.
Intervening Use
Basically, if you donate your car to a charity, which then uses it to make deliveries or pickups (or for other work-related reasons) before selling it for less than your estimated $ 1,000, you may be able to still deduct the full $ 1,000 if they offer proof of use as well as proof of sale.
The three most important rules are are: the addition most to please deducts, and what documentation you have to have, deductions for donated vehicles must still follow all the rules for any other charity deductions you may have.
Donation must be within the tax year.
This means that your car must be donated by December 31, 2007 to be included as a deduction on your 2007 taxes.
Deductions must be itemized.
If you decide that you can claim, you may want to be selling it outright, you can only get a tax break for it if your itemized deductions on a 1040 - A exceed the standard deduction that would normally apply to you.
Documentation must be submitted with your return.
While it is necessary that such documentation be included with your w-2 & # 39; s when you submit your return. (Make sure you keep a copy.)
After all this, should you still donate a car to charity? Yes. Most beneficial both to you and the accepting charity - and there are around 4,000 charities across the country that take parked vehicles.
One final tip though? Always consult your tax advisor.
