Charitable Deductions

On the radio you often hear how you can save money by donating car or other property to charity.  To get the deduction for the donation this year you must donate it before December 31, 2006.  Donating it after January 1 makes it a donation for 2007.
Donating a car to a charity may not be the most efficient way to dispose of the vehicle.

Before donating the car I would recommend that you check the used car values with Kelly Blue Book (KBB), National Automobile Dealer’s Association (NADA) or Edmunds. There you may be able to get an estimated value of your car, be realistic when you put in the condition of your car.

Also, since some states have a “Lemon Law” relating to sale of used cars, you may be responsible to pay for repairs even if you sold the car “as is”.  Therefore, you should take careful consideration as to the potential costs you may incur.

Ask a dealer what they will give you for a trade.

If you don’t want the hassle of disposing of your car or giving the dealer a bargain as a trade in, using one of the charities is an easy way to dispose your car and you will get a charitable deduction for the amount the charity receives on the sale of your car.

If the charity does not sell your car and uses it in its organization’s operation then you can use the estimated fair market value based on Kelly Blue Book, NADA or Edmunds.

Just remember that a deduction for a charitable contribution is an itemized deduction. If you don’t itemize deductions on your tax return, you may not save any taxes.

Also, the amount of tax you save will be a portion of the value of the deduction, depending on your tax bracket. If the car is worth $2,000.00 and you are in the 35% federal tax bracket you will save $700.00 in federal income tax. If your state allows you to deduct the contributions, you may save state taxes as well.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s