Page 74 - December_2015_Life_in_Naples_Magazine

FINANCE

YOURDOCNAATINRG

Oby Michael Wiener, E.A. “For instance, if you have
ver the years my clients have asked me about valued the car at $5,000
donating their car or other vehicle to charitable and the charity sells it for
organizations. The tax benefits for making such a ”$4,000 your deduction is
charitable contribution are real enough but they come with limited to $4,000.
some strings attached. If you aren’t careful, you could end up
with a deduction that is lower than the one you bargained for lining in the tax rules: If the charity “materially improves” the
- or no deduction at all. vehicle for its own use - for instance, it repairs a bent fender
or installs a new feature like a navigation system - you can still
In the past, donating cars to charity was a win-win situation deduct the car’s fair market value.
for the donor and organization, even
if you were giving away a lemon. All The best approach is to not to jump at the first opportunity
you had to do was arrange the pick-up to donate a car to charity. It may pay to search for an
or drop-off, refer to an auto-buying organization that will agree to fix it up and use the vehicle for
guide like Kelley Blue Book (KBB) its stated charitable purposes.
and then deduct the car’s fair market
value based on the figures in the If you should have a topic that you would like me to
guide. But taxpayers got greedy - as discuss or if you should have a question, please feel free
they tend to do - and often overstated
these values on their tax returns, so to call 239.403.4410 or e-mail me at
Congress felt compelled to tighten mike@cctaxandaccounting.com.
up the rules in 2004.
An enrolled agent, licensed by the US Department
Under current law, no deduction is allowed for a car with of the Treasury to represent taxpayers before the IRS
a value of less than $500. If you use a buying guide such as
the KBB to set the car’s fair market value, the deduction may for audits, collections and appeals. To attain the
be reduced if the charity turns around and sells the vehicle, enrolled agent designation, candidates must demon-
as many likely do. For instance, if you have valued the car at strate expertise in taxation, fulfill continuing education
$5,000 and the charity sells it for $4,000 your deduction is
limited to $4,000. credits and adhere to a stringent code of ethics.

Within 30 days of the charity selling the vehicle, it must
provide you the selling price on Form 1098-C (Contributions
of Motor Vehicles, Boats, and Airplanes). This is the proof
you’ll need if the Internal Revenue Service ever challenges
the deduction amount. If you haven’t heard from the charity
within 30 days, get on the phone pronto to secure the necessary
paperwork.

For the most part, deductions for vehicles will be lower
than the amount of the fair market value. But there’s one silver

74 Life in Naples | December 2015