Tax Tip of the Week
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Don't get taken for a ride
For the week of
December 17, 2001
It seems you can't turn on the radio these days without hearing a pitch to donate your old vehicle to charity. The charity promises a tax deduction in return for your old car, boat, or aircraft. Is this pitch too good to be true? Here's what you should know.
- Make sure the organization is "qualified." Otherwise, your donation will not be tax deductible. A qualified organization is one that's been given special tax status by the IRS. To find out whether a charity is qualified, call the IRS at 1-800-829-1040 or visit their Web site at www.irs.gov/bus_info/eo/eosearch.html. You can also check with your state's charity regulator, such as the Secretary of State or State Attorney General.
- Determine the fair market value. While some charities may tell you to deduct the car's "blue book" value, the amount you can actually deduct is the "fair market value" (i.e., the amount a willing buyer would pay for the car). Depending on your vehicle's condition, this may be substantially less than the blue book value.
- Get a statement from the charity. Recordkeeping requirements vary depending on the value of the car. Generally, you'll need a statement from the charity documenting the donation. You'll also need documentation on how you determined the fair market value.
- Itemize your deductions. If you don't have enough deductions to itemize, you won't get a tax benefit from your gift. To itemize, your total deductions (e.g., medical expenses, mortgage interest, state and local taxes, and charitable donations) must exceed the standard deduction. The 2001 standard deduction varies depending on your age and filing status ($4,550 for singles, $7,600 for joint filers, $6,650 for head of households, more if you're over 65 or blind).
If you follow the rules, a charity can benefit from your generosity and you can
benefit from a tax deduction. If you are considering making sizable gifts to charities or to others, please call
us for assistance.
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The information contained in this site is of a general nature and should not be acted upon in your specific situation
without further details and/or professional assistance.
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