| Although the laws were changed in 2005 to | | | | deduct the real fair market value - the price you |
| reduce the incidence of perfectly legal "tax fraud," | | | | can actually get for the vehicle if you were to go |
| there are still several situations where you may | | | | ahead and sell the car yourself. If the car is |
| claim the "fair market value" of your car, truck, | | | | actually used as a car by a needy individual, your |
| boat, RV or trailer when you donate any to a | | | | deduction can increase as much as 10-fold versis |
| legitimate charitable non-profit organization (NPO). | | | | sold on the wholesale market. |
| However, the rules governing what is "fair market | | | | FYI Fair Market Value- In general terms: |
| value" have also changed. | | | | Generally, if you claim more than $500 as |
| Until it was clarified, many people (and paid tax | | | | deduction, you can deduct the smaller amount -- |
| professionals) thought this meant taking the "fair" | | | | the gross proceeds from the sale of the car by |
| amount from the Kelley Blue Book (or a similar | | | | the organization, or the car's fair market value. |
| estimation service), regardless of the actual | | | | Now different rules will apply if you claim a |
| condition of the vehicle. The IRS had different | | | | deduction of $500 or less. Generally, the less liquid |
| ideas about just what that was when they wrote | | | | and more unique a piece of property is, the |
| the statute, but the wording was less than clear. | | | | harder it is to accurately determine its fair market |
| The fair market value clause cost the IRS an | | | | value. For example, farm land is generally treated |
| estimated $640 million in 2000. | | | | as a commodity and its fair market value can be |
| Also, consider what shape the vehicles donated | | | | determined with relative ease by comparing the |
| by middle-class Americans are actually in when | | | | sale prices of neighbouring properties. Generally, |
| their owners finally consider donation. Such | | | | for a vehicle that has been purchased within the |
| vehicles are very often in less than "poor" shape. | | | | last three months, the agreed value will be the |
| Many third-party, for-profit companies that acted | | | | purchase price. |
| as agents for charities were taking cars whether | | | | If at any point in the first two years after you |
| they ran or not (and advertising as such). The | | | | donate a car to charity, the car is subsequently |
| owner got to avoid a fee at the scrap yard, let | | | | sold, the charity will have to send you another |
| someone else pick the car up for free and claim | | | | receipt (actually a Form 8282) letting you know |
| the fair market value as a tax deduction. | | | | what happened to the vehicle. You don't have to |
| However, taking into account the actual fair | | | | change anything on your taxes, whether you've |
| market value of your vehicle is where the IRS | | | | filed them yet or not. If it was legitimately used |
| noted the discrepancy in question. Not only were | | | | for any length of time, you may claim the fair |
| the agents skimming as much as 70% of the sale | | | | market value of the car when you donated it. |
| price of each vehicle right off the top in legitimate | | | | In fact, to back up your claims and justify the fair |
| (though sometimes dramatically padded) "service | | | | market value of your car that you've chosen, it is |
| fees," but the difference in real worth became | | | | often a good idea to take pictures of the vehicle, |
| apparent at the point of sale. Since most of those | | | | inside and out. If the vehicle is valued at over |
| cars ended up on the wholesale market, the price | | | | $5,000 you'll need a independent appraisal (in |
| difference was even more acute. | | | | writing) to confirm your fair market value |
| Even the "poor" rating in the Blue Book requires | | | | calculations. |
| the vehicle be in 'running' condition. It is clear there | | | | If the vehicle is to be fixed up and sold, you may |
| was a major difference between what these | | | | also claim the actual fair market value of your |
| vehicles would fetch if someone put a classified | | | | car, as it was when you owned it, only if the |
| ad in the paper and their fair market value, as | | | | vehicle is repaired to such an extent that it may |
| someone who'd taken economics classes would | | | | be sold for more money. You are still allowed to |
| understand the term. The laws were changed in | | | | claim as much as you could have gotten if you'd |
| 2005 to require a receipt of any gift valued over | | | | placed a classified ad. |
| $250 as well as a written satement of what the | | | | Though the concept of fair market value does still |
| car actually sold for (over $500) or what use it | | | | allow you to claim values that assume perfect |
| was put to. Therefore, if the car is sold as its | | | | selling conditions. However, in the real world, many |
| first use after donation, you will only be able to | | | | people price old cars in order to make them sell |
| claim the amount of the sale price that was | | | | as quicklyas possible, so consider what you could |
| actually given to the charity. | | | | actually gotten for it if you tried. You can assume |
| However, if the vehicle is used, as is, you may | | | | a small advertising budget. |