Debt Free

4520 changed this procedure just a wee bit. Now, unless the charity actually uses the vehicle for, and this is important, tax approved, charitable work, you can only claim the gross amount they sell you vehicle for. In addition, it is their responsibility to inform you of this amount upon completion of the sale. As you can see, this approach is fraught with uncertainty for you.

First of all, you’ve got no idea what this amount will be at the time you donate the car. Because of this, you don’t know the amount of the future sale at the time of donation, you don’t know, from a tax perspective, if the car is even worth donating. You may be far better off to sell the vehicle yourself, or give it to your brother in law with the old John Deere and the T-bucket in exchange for a side of beef.

Second, you must wait for the charity to provide you with timely notification. This is important, because you must have this documentation before you file your taxes for the year in which you will claim the deduction.

Before you make any donation, be sure you are donating to a registered, 501(c)(3) organization. These organizations are specifically allowed by the IRS to accept donations and in exchange for a tax deduction. You don’t want to run afoul of the IRS by trying to claim a deduction to which you’re not entitled.

There are also new documentation procedures you must follow in order to claim your tax deduction. Obviously, your life isn’t complete unless you have more IRS documentation to contend with. I’m willing to bet that charities that depend heavily on donated vehicles as a source of funds aren’t too thrilled by this turn of events. Be sure you verify everything with a qualified tax advisor before you claim your deduction. So, before you “make room for that new car you deserve”, make sure that you realize the tax consequences of the donation.