Money Power: Tax deductions vary for vehicle donations
BY SANDRA BLOCK Money Power
Sunday, December 02, 2012
12/02/12 at 3:39 AM
The ads from charities that accept donations of used cars make it sound simple. The charity picks up the vehicle, and you get a big tax deduction. Everybody wins.
But depending on what happens to the car after it leaves your driveway, you could receive a much smaller deduction than some of those ads imply.
In most cases, your deduction is limited to the amount the charity receives from the sale of the car, says Bob Meighan, vice-president of TurboTax. So if the charity sells the car for $1,000, your deduction is limited to $1,000.
But there are two exceptions to this rule: First, if the charity sells your vehicle for $500 or less, you can deduct $500 or your vehicle's fair-market value, whichever is less.
The other exception is when the charity uses the car as part of its charitable mission. For example, if the charity repairs donated cars and gives them to needy families, or if the charity uses donated cars for specific tasks such as delivering meals to seniors, you can deduct the fair-market value (check Kelley Blue Book at tulsaworld.com/bluebook).
Because of previous abuses, donations of used cars and other noncash items may attract extra scrutiny from the IRS. So keep scrupulous records. Get a written acknowledgment from the charity showing your name and taxpayer identification number, the vehicle identification number, and the date of the contribution.
If your deduction exceeds $500 and the vehicle was resold by the charity, you'll need a written acknowledgment from the charity showing the proceeds of the sale.
Original Print Headline: Deductions vary for donation of vehicles
Sandra Block is a senior associate editor at Kiplinger's Personal Finance magazine. To send her a question or comment, go to tulsaworld.com/kiplingerfeedback.