Donate Car Tax Deduction
So you are looking at donating your car to charity and get yourself a tax deduction, huh? Well back in 2005 there was new legislation enacted by the government that made it harder for donors to claim a deduction for a car donation.
There has been a lot of confusion in this area, some people have stayed away from giving these types of gifts, but interesting enough the government has found that the new law has not done a lot to curb abuses.
With this in mind, if you are going to claim a deduction for this time of gift, which is a car donation, just make sure that you follow the rules so you do not find yourself on the other end and be audited by the IRS.
Many people have had problems trying to understand the new rules so I am going to try break it down into simple terms for you now. Basically you can no longer use the Fair Market Value to determine your deduction. If your car is worth more than five hundred dollars you need to wait for the charity to sell the car and let you know how much it received at auction.
If your car is worth less than five hundred dollars, you can still use the Fair Market Value (FMV). There are a few other circumstances when the Fair Market Value may apply such as if the charity keeps the vehicle for their own charitable purposes or sells it as a discount to someone who is in need.