Donating Cars To Charity New Tax Rules

Donating Cars To Charity New Tax Rules



Donating Cars to​ Charity - New Tax Rules
On June 3,​ 2018,​ the​ IRS released guidance on​ charitable deductions for donated vehicles .​
The American Jobs Creation Act (AJCA) radically changed the​ amount of​ the​ deduction taxpayers can claim for their donated car.
Fair Market Value v .​
Actual Sales Price
When donating a​ car to​ charity,​ a​ taxpayer traditionally was allowed to​ deduct the​ fair market value .​
The new law changes this valuation to​ the​ actual sales price of​ the​ vehicle when sold by the​ charity .​
The taxpayer is​ also required to​ get written and timely acknowledgment from the​ charity in​ order to​ claim the​ deduction
The AJCA does provide some limited exceptions under which a​ donor may claim a​ fair market value deduction .​
If the​ charity makes a​ significant intervening use of​ a​ vehicle--such as​ regular use to​ deliver meals on​ wheels-- the​ donor may deduct the​ full fair market value .​
For example,​ driving a​ vehicle a​ total of​ 10,​000 miles over a​ one-year period to​ deliver meals is​ a​ significant intervening use.
The AJCA also allows a​ donor to​ claim a​ fair market value deduction if​ the​ charity makes a​ material improvement to​ the​ vehicle .​
Under the​ guidance,​ a​ material improvement means major repairs that significantly increase the​ value of​ a​ vehicle,​ and not mere painting or​ cleaning.
Interestingly,​ the​ IRS has also added an​ exemption not included in​ the​ AJCA .​
On its own,​ the​ IRS has determined that taxpayers can claim a​ deduction for the​ fair market value of​ a​ donated vehicle if​ the​ charity gives or​ sells the​ vehicle at​ a​ 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.
If you​ intend to​ assert one of​ these exemptions,​ how do you​ determine the​ fair market value? Generally,​ vehicle pricing guidelines and publications differentiate between trade-in,​ private-party,​ and dealer retail prices .​
The IRS consider the​ fair market value for vehicle donation purposes to​ be no higher than the​ private-party price.
The new provisions of​ the​ Americans Job Creation Act certainly make it​ less attractive to​ donate a​ car to​ charity .​
Using the​ exemptions,​ however,​ you​ can still create a​ sizeable deduction while helping others who are less fortunate.




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