If you are planning to donate your used car to charity before the end of the year, make sure you determine exactly how much you can deduct on your taxes and what paperwork will you need to keep.
This last-minute maneuver can ensure that you don't greet the new millennium with a tax hangover.Charitable contributions made by Dec. 31 are deductible on your 1999 return. And donations don't have to be in cash. That's why you'll see veritable conga lines of used cars rolling toward charities across the country in the week after Christmas. If you give a car to a charitable organization, you get to deduct the vehicle's value on your return.
Unfortunately, that isn't quite as simple as it seems, particularly now that the IRS is convinced that there's a whole lot of cheatin' going on. What grabbed the tax agency's attention were aggressive ad campaigns that suggested taxpayers could deduct the "full Blue Book value" of a car, even if it was a pile of junk. Not so.
The law allows a write-off for the fair market value of the car. So if your clunker's not worth much sitting in your driveway or as a trade-in, it's not worth much on your tax return, either.
It's up to you to determine the value of the car, and it makes sense to start with a figure from a used-car price guide such as Kelley Blue Book (available at banks and car dealerships, or on the Web at www.kbb.com). Then adjust for the condition of your car, perhaps by checking with used-car dealers.
If you claim a deduction of $250 or more, you must get a receipt. (And it's up to you to make sure the charity is legitimate.) If your write-off exceeds $500, you must file Form 8283 with your return, and if it's more than $5,000, you'll need an independent appraisal.
Don't let apprehension over IRS scrutiny drive you away from getting a fair deduction. Although the agency doesn't go out of its way to correct silly misimpressions -- such as a report in one personal-finance magazine that the IRS is reviewing every auto-donation deduction claimed since 1997 -- donating a car isn't an invitation for an audit.
"That's simply not the case," says Marcus Owens, the IRS official in charge of the crackdown. "Never has been. Never will be.