Tax/Donation question

[matt_j]

Here's a question to finace/tax guys...

How does it work out when you donate your car and get a voucher from the organization? Here's my story. I have a car that I can sell for $5000 but I can donate it to organization (volunteer ambulance corp) and get receipt for value of the car which is around $8000. So what happens during tax season? Do I get $8000 back (sounds silly)? Do I get half back? Does it pay to donate the car? How does it work?

 

[rscanady]

You dont get $8000 back, but what I believe is that you can take $8000 off of your calculated income.

If you did you taxes today and your taxable income was $50000 for the year and you donated the car, then you only pay taxes on $42000 instead.

Sounds like you might be better off selling it?

Ryan

 

[matt_j]

So it sounds like I would in the example you used I would have a 42K income but taxes I paid would be on 50K income... I would get back taxes on that 8k I donated which is about 1/3. Hmmm... That makes some sense but not worth it. Oh well.

 

[BB]

I would also look into the validity of the organization receiving the donation... Years ago my Dad donated his Volvo Wagon and, apparently, it was driven for quite a while by somebody connected to the organization without changing registration or paying bridge tools 500 miles to the south of us.

I got a feeling that many of these organizations are just collecting a few bucks for the the use of their "good names" and are not really involved to any extent at all in these donation schemes/mills/etc.

And another reason for looking into the organzation and how the whole deal is done (who did the valuation, etc.).

LA Times:

If the IRS determines your donation was overstated--or that the charity you gave to was not legitimate--you could find your deductions ripped out from under you. That could subject you to additional taxes and penalties.
...

What may be most disturbing to honest taxpayers is Owens' belief that some car donation programs are not actually run by charitable institutions at all.

Instead, they're being operated by for-profit auto salvage firms that buy the right to use a charity's name by promising to pay the charity a set dollar amount for each car donated. If that's the case, you are not donating your car to charity--you are giving it to a for-profit company. You don't get a deduction for that, Owens said.

-Bill

 

[matt_j]

Well organization is valid (I'm a Capt) and value is just plain blue book value for car in fair condition. We need new first response car and we are shopping for one and I don't mind taking a small hit but I'm not rich by any means.

 

[Brighteyez]

The rules on donated vehicles changed recently and you'll probably only be able to deduct it's true actual resale value (not book). It is best that you contact a tax professional though as to it's impact (or benefit) on your taxes specifically. You can contact the IRS and get the information regarding the deduction details for free, but I'd suggest calling at least two or more times and then taking the consensus of the information since they often give out incorrect info.

Also, I'm not a finance or tax type of person, my wife is the tax attorney.

Here's a question to finace/tax guys...

How does it work out when you donate your car and get a voucher from the organization? Here's my story. I have a car that I can sell for $5000 but I can donate it to organization (volunteer ambulance corp) and get receipt for value of the car which is around $8000. So what happens during tax season? Do I get $8000 back (sounds silly)? Do I get half back? Does it pay to donate the car? How does it work?

 

[BIGIRON]

Bottom line - talk with a tax pro (and I don't mean H&R Block) - at least a CPA, or EA (Enrolled Agent with IRS) Accountant. It could actually be a good deal for you, depending on your income and other deductions. Remember, any contribution or expense only has the value that actually exceeds your standard deductions.

 

[Mike Painter]

Here's a question to finace/tax guys...

How does it work out when you donate your car and get a voucher from the organization? Here's my story. I have a car that I can sell for $5000 but I can donate it to organization (volunteer ambulance corp) and get receipt for value of the car which is around $8000. So what happens during tax season? Do I get $8000 back (sounds silly)? Do I get half back? Does it pay to donate the car? How does it work?

First you must be sure the group you gave the car to is a legal 501(c) 3 orginazation. If not you could get bit if they ever get found out.

Then read this which outlines the federal tax laws involved. It depends mostly on how the vehicle will be used.

$5000.00 in your pocket is probably a *lot* more than an $8000.00 deduction from your income.

 

[cyberhobo]

Depends on your filing status and how/what you itemize.