2009/08/09

Donating Cars To Charity – New Tax Rules

On June 3, 2005, the IRS released guidance on charitable deductions for donated vehicles. The American Jobs Creation Act (AJCA) radically changed the amount of the deduction taxpayers can claim for their donated car.

Fair Market Value v. Actual Sales Price

When donating a car to charity, a taxpayer traditionally was allowed to deduct the fair market value. The new law changes this valuation to the actual sales price of the vehicle when sold by the charity. The taxpayer is also required to get written and timely acknowledgment from the charity in order to claim the deduction

The AJCA does provide some limited exceptions under which a donor may claim a fair market value deduction. If the charity makes a significant intervening use of a vehicle–such as regular use to deliver meals on wheels– the donor may deduct the full fair market value. For example, driving a vehicle a total of 10,000 miles over a one-year period to deliver meals is a significant intervening use.

The AJCA also allows a donor to claim a fair market value deduction if the charity makes a material improvement to the vehicle. Under the guidance, a material improvement means major repairs that significantly increase the value of a vehicle, and not mere painting or cleaning.

Interestingly, the IRS has also added an exemption not included in the AJCA. On its own, the IRS has determined that taxpayers can claim a deduction for the fair market value of a donated vehicle if the charity gives or sells the vehicle at a significantly below-market price to a needy individual, as long as the transfer furthers the charitable purpose of helping a poor person in need of a means of transportation.

If you intend to assert one of these exemptions, how do you determine the fair market value? Generally, vehicle pricing guidelines and publications differentiate between trade-in, private-party, and dealer retail prices. The IRS consider the fair market value for vehicle donation purposes to be no higher than the private-party price.

The new provisions of the Americans Job Creation Act certainly make it less attractive to donate a car to charity. Using the exemptions, however, you can still create a sizeable deduction while helping others who are less fortunate.

Tags: online tax refund, tax credit refund.

Filed under Tax Refunds by taxrefunds on Aug 9th, 2009. #

Random Search Terms

how many weeks to get taxes back if file by paper, how to get GA 1099G refund, what to do with an expired cheque from hm revenue and customs, can federal tax return be forwarded?, Are tax refunds getting faster in NC, anyone got their ny state 2011 tax return, California tax refunds taking a long time?, has anyone gotten an amended tax return refund 2011, 0TNONCUM, new york state income tax rate 2010 calculator, has anyone gotten their Kansas refund this year?, how long to receive an intercepted tax refund for child support, how long will the refund check comes nj 2011, vat refund in houston, 2011 california tax refund delay, who can i speak to about my tax refund, i have not received my california state tax refund on an amended return, can my tax refund be intercepted, how to check on your 2009 illinois tax refund check, delay in illinois tax refunds, Refund under review, what does a incone tax check look like, has anyone recieved their nys tax refun, can the state of missouri pay their refunds for 2011, hawaii tourist tax return, what does state income tax check look like, possible tax refund first time home buyer, Do i get my tax refund the day it supposed to be mailed, how long does nc tax return take, how long to get alabama state tax refund 2011, how long does it take to tax refund to come in the mail, timilnes, north carolina kept my state tax refund, Who gets more taxes taken out of their paychecks a single 1 or married 0, does mail forwarding work with tax returns, no sales tax for foreigners in texas, rent deduction on missouri tax return, TAX REFUND FIRMS, how long does it take to receive a federal tax return after it is mailed out, how long does irs check take to cleqr, what does it mean when your state taxes are pending review, irs refund maryland state refund for 2011, theories about tax credits in exports