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February 1, 2015

Tax Deduction for Car Donations
If I give my old car to charity, which tax deduction do I get: trade-in or resale value?

Charity groups these days are making it easier to get rid of a used car than leaving it with the engine running in a convenience store parking lot. Consider: for that beaten-up, beaten-down hulk at your house, you can get a major tax deduction, the satisfaction of doing a good deed -- and the charity group may even toss in free towing.

Wait, it gets better. You also get to skip the advertising costs and stranger-dangers of trying to sell the car to a private party, or worse yet -- the utter shameful degradation of having to deal with a used car lot's professional buyer who sneers at your offering as tin road kill.

But before breaking your arm patting your back for beating the system, you'd better know that because of the currently overwhelming number of these charity gifts, and the super-generous deductions many taxpayers have been taking for them, the IRS is starting to climb all over them like ants on a snack cake.

Remember, the charity doesn't evaluate the donation, the donor does. So, guess what most donors give themselves the maximum break by taking the Kelley Blue Book or NADA (National Automobile Dealers, etc...) "High" Book value as the, uh, true, fair value of their donations.

This may seem only just compensation for doing good works to the donor, but to the eagle-eyed auditors at the IRS, these used-car reference books should be used as a starting point; not as the end all. To them, if the vehicle has a broken axle, cracked block, missing or shredded seats, an inferior paint job, or even a non-working battery which requires it be to be towed away, the car is not worth Blue Book average retail and should be reduced in value, proportionally.

Proportionally? What's realistic? Their standard is how much it will cost the charity to make the car sellable; $100, 500, 1000, or is it even worth salvaging and deducting? The days of taking top dollar for that deformed, crippled 86 Tudor with the warped head could well be putting your head on a block and not the cement ones that wreck was sitting on.

Today's moral: When using an old car to get to heaven, remember the road goes through the IRS.


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