News flash!  This just in…

The IRS has loosened-up a tiny bit on car donation rules.

Until this year you could claim the “fair market value” (otherwise known as ‘Blue Book’ value) if you donated a vehicle to charity.   But that all changed when the American Jobs Creation Act (AJCA) was passed into law last fall.  The AJCA severely clamped down on the deductibility rules.

Under AJCA, a taxpayer who donated a car to charity could claim only the amount the charity got when they sold your vehicle. 

Narrow exceptions allowed taxpayers to deduct the ”fair market value” of the car or truck IF the charitable organization kept the vehicle (instead of selling it) AND used it to deliver meals, OR IF they made significant improvements or repairs to the vehicle.

But a rule change JUST ANNOUNCED, lets you deduct the fair market value of the vehicle “if the charity gives or sells it at a price significantly below market-price to a needy individual, as long as the transfer furthers the charitable purpose of helping a poor person in need of a means of transportation.”

But don’t get too excited.  Even if they sell it for cheap under those guidelines, you can’t pick the highest Blue Book value, as many taxpayers did in the past.  The Blue Book lists Trade-In Value, Dealer-Retail Value and “Private-Party Value” (that means you sell it on your own through a classified ad, for example). 

The new guidance says that you can deduct “no more than the private-party price” - which still beats the heck out of the alternative!

There’s paperwork involved, of course… 

You have to get at written statement from the charity saying how much they sold the vehicle for, or that one of the three exceptions applies. 

Don’t worry, the charity will cooperate because the new law also says that the Feds will hit them with a penalty if they don’t. 

Bottom line:  If you give a vehicle to charity, you won’t know how much you’ll get to write-off until the charity decides how they will use the vehicle or until you see how much they get when they sell it – neither of which you have any control over.

Hey, is this a great country, or what?

That’s a “Tax Tip You Can Bank On!”

Chant these words: Pay Uncle Sam every dollar he is entitled to under the law–but not one penny more!

Save a Bundle!

Ron Mueller

Ron Mueller is the author of It’s How Much You KEEP, That Counts! Not How Much You Make, still available for as little as $27 at www.HomeBusinessTaxSavings.com.