ANSWERS: 1
  • If you donate your used vehicle to charity, the Internal Revenue Service (IRS) lets you take a tax deduction. The tax law changes regarding car donations impact the value of the deduction you are allowed to claim.

    Purpose

    According to Edmunds, the IRS was losing tax revenue because people were claiming too high of a value for their car donations to charity.

    Deduction Size

    Instead of being able to deduct the fair market value of the car, you must usually limit your deduction to the price at which your car was sold by the charity. Therefore, even if your car had a fair market value of $5,000, if it only sold for $3,000 at auction, your deduction would be limited to $3,000.

    Function

    According to "Consumer Reports," you should make sure you get a receipt from the organization you donated to that details the particulars of your car, its condition and how it was used by the charity or its sale price.

    Considerations

    If the charity puts your car to use within its organization, such as loaning it out to needy families rather than selling it, you can deduct the fair market value of the car.

    Significance

    Changes in the law have made donations to charities that make use of donated vehicles much more popular.

    Source:

    IRS: A Donor's Guide to Vehicle Donations

    Edmunds: Does Charity Car Donation Still Make Sense Under Tougher IRS Rules?

    "Consumer Reports: Car Donations---Rules of the Road"

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