Vehicle donations

On October 22, 2004 a new bill signed into law by President Bush (HR 4520) placed restrictions on car donations to charity. These restrictions are important to understand if you are looking at donating your car to charity.

Before January 1, 2005 an individual donating their car to a charitable cause was allowed to deduct the "fair market value" of their vehicle from that year's taxable income.

This means that if you had a car with a Kelley Blue Book value of $3,000.00, it could be donated to a charity and you'd have the possibility of writing off $3,000.00 of taxable income. With 25% taxes, that could be a value of $750.00 off of your taxes.

Depending on the actual condition of the car, and market conditions, the car might be sold by the charity for $700.00 at a used car auction.

As of January 1, 2005, when an individual donates a car and it is resold, they can only deduct the actual amount the car was sold for, not its fair market value.

This means that if you donated a car today worth $3,000.00 fair market value, and the charity sold it for $700.00, you'd be looking at tax savings of approximately $175.00 if your taxes were 25%.

If you are only donating your car in order to save money, selling your car will probably get you a better return. Call us at 800-920-6792.

However, if you are interested in donating your car to a specific charity you want to support, and can afford to do this, this can be a noble way to help your charity group.

Reference links:

http://www.donateacar2charity.com/new-tax-law.php
http://www.internetautoguide.com/auto-news/25-int/8665/index.html
http://www.msnbc.msn.com/id/26625209/