December 31 is the deadline for taxpayers to write off the fair market value of a vehicle donated to charity. Under new legislation effective January 1, taxpayers must use the vehicle’s actually sale price from wholesale auction in deductions for charitable vehicle donations.
Legislators changed the law after determining that too many tax payers have taken advantage of the system, overvaluing donated property, specifically vehicles. The revised regulation is expected to reduce deduction amounts by $2.3 billion over the next 10 years.
Kelley Blue Book offers a resource to help taxpayers anxious to complete a vehicle donation before Dec. 31. Under the Blue Book’s Private Party Value, would-be donors input the vehicle’s mileage and current condition in the used-vehicle condition quiz to accurately determine a car's fair market value. The printed condition quiz and value report can be attached to the tax return.
Kelley Book also suggests the following guidelines in donating vehicles to charity:
Make sure the charity is a recognized and trusted organization. The donor should be familiar with the charity's purpose. Be careful of 'sound-alike' charities. Radio advertising does not mean a charity is legitimate. The Better Business Bureau can help determine if a charity is a recognized organization.
Ask how much money the charity receives. According to a government report, more than $34 million was donated in automobile revenue in 2000, however, only 32 percent of the gross revenue was returned to the charity. To work with charities that receive the maximum amount of return, visit www.vehicle-donation.com.
Sign the title over directly to the charity or its agent. Never leave the title blank. Many illegitimate charities ask that the title be left blank. This practice may leave the donor liable for the vehicle months the donation.
Get a receipt. When making any non-cash contributions, donors must get a receipt from the charitable organization including the name of the charity, its tax ID, date, location of the contribution, and a detailed description of the donation. This information should be retained to justify the tax deduction.
For more information and IRS tax forms visit the Kelley Blue Book Web site, www.kbb.com/donation