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