Did you donate your car or truck to charity last year? If so, be careful how you claim the deduction on your tax return.
By donating your vehicle, you can dispose of it without a hassle, support a worthwhile cause, and get a tax break all at the same time. But beginning last year, the IRS tightened the rules for valuing your deduction.
The general rule is that you can deduct the fair market value of your vehicle at the time you made the donation. Most charities sell donated vehicles at auction. If they do, and it’s worth more than $500, they should send you a Form 1098-C which will show the gross proceeds of the sale.
That’s assumed to be the fair value and the maximum amount you can take as an itemized deduction. You must attach this form to your tax return.
There are a couple of limited exceptions. For example, the charity might give or sell the car to a needy individual, or use it themselves. But you’ll still need to attach the Form 1098-C they give you.
If the donation was worth $500 or less, you can claim up to the fair market value. If you use a published guide to used car values, make sure you use the “private sale” value, not the “dealer retail” value.
And choose the value corresponding to the age, mileage, and condition of your vehicle. You’ll still need to have a written acknowledgment from the charity if the value is $250 or more.
If you have any questions about the new rules, please contact our office. We can help you receive the deduction to which you’re entitled.
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