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Location: Westland, Michigan, United States

Graduate of Walsh Institute Of Accountancy (Now Walsh College) Michigan in 1959. Retired in 1987, but still active in the profession **World War II Veteran (Pacific) **PHONE 734-261-1979 **E-MAIL -cpabakem01@yahoo.com **(Domain Name CPASENSE Registered) **Mentioned in the Journal of Accountancy, SmartPros, Tax Prof Blog, CPA2BIZ, CPA Journal, AccountingWEB, CPATrendlines & More **Search Accounting Blogs: http://www.blognetnews.com/accounting (Includes cpasense)**TOPICS - FINANCE - FEDERAL & MICHIGAN TAXES ** Making Sense Of Your Finance & Taxes

Friday, May 27, 2005

Car Donations Made This Year -Tax Deduction Valuation? - New Law

PERSONS wishing to donate vehicles valued in excess of $500 THIS YEAR still may do so. However, they can no longer use the vehicle’s Blue Book value to determine the tax deduction and instead must use the actual price the vehicle is sold at auction by the charity under new law.
THE new car donation law curbs drastically the economics of many car donations. Take the example of a prior year taxpayer taking a $2,400 deduction for a donated truck sold at auction by the charity for $375. Assuming a combined 20% federal and state tax rate for the donor, a donation is worth $480 in saved taxes - so the donor was better off donating the car than selling it.
NOW, this year, the deduction for the same car would be limited to $375 (the charity sold it for at auction), resulting in a $75 tax savings. Many would-be donors will just sell the car now; assuming they would also sell it for $375, they'd be money ahead to do so, but you should run the figures for your situation.
WHAT TO DO? I recommend that, in the above example, you consider a donate cash or appreciated securities to the Salvation Army. No charity makes better use of their resources.
OH, and just sell the car.

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