Determining the Value of Your Car for a Tax Deductable Donation

Determining the Value of Your Car

The maximum amount you can deduct on your income tax return is the fair market value of your car. Fair market value is the price a willing buyer would pay and a willing seller would accept for the car, when neither party is compelled to buy or sell, and both parties have reasonable knowledge of the relevant facts.

These comments are pretty vague, so make sure that you read more about this below
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Some fundraisers have mistakenly claimed that donors can, in all cases, deduct the full value of their cars as found in a used car guide (such as “blue book” value). A used car guide may be a good starting point to value your car, but you should exercise caution. The IRS will only allow a deduction for the fair market value of the car, which may be substantially less than the “blue book” value.

Example: You donate your car to the local high school for use by students studying car repair. Your credit union representative told you that the “blue book” value of the car is $1,600. However, your car needs extensive repairs, and after some checking, you find that you could only sell your car for $750. Your charitable contribution deduction may not exceed $750, the fair market value of the car.

This example is kind of odd…I mean how are you actually suppost to find out this number?

For information on determining the value of your car, see Publication 561, Determining the Value of Donated
Property. If you used your car in a trade or business, see the rules for contributions of capital gain property in Publication 526.

Written by in: -2008 Tax Laws |

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