The IRS has taken steps to take the guesswork and confusion associated with car donation tax deduction with a new law. When January 1, 2005 rolled around, you were able to deduct the full price that the charity of your choice receives for the sale of your car.
Many times people were hesitant to donate their car to a charity that so desperately needs the help simply because of the hassle involved in finding the fair market value of their vehicle if the vehicle was worth more than $500.
With the new law if your car sells for more than $500 at the auction where your car will be sold, the charity is obligated to send you a receipt that has your name and vehicle identification number or VIN of your car. This is the fair market value price. It is that simple. No more searching through records and books trying to find the right numbers to make your car donation tax deduction.
The tax receipt that the charity is required to send you will be less detailed and will merely acknowledge your donation. The information included on the tax receipt will be your name, the date of the donation and a brief description of the vehicle.
The simplification of the laws concerning car donation tax deduction is good news for charities. Spread the word so that more people donate more cars to help even more people.
He writes off the car as a tax deduction.
But what does the law say? And what are the rules for writing off vehicles? It turns out that you can write off the cost of buying and using a car if you're self-employed and use your vehicle in your business.
But this deduction is trickier than most people realize. Here's the first big thing that goofs many people up.
With this information, you can then either deduct an amount equal to the business miles times a standard per-mile rate of roughly $.35 or $.40 a mile (depending on the year)...
Note that only your business miles-and not your commuting miles or personal miles are deductible.
For example, if your business use equals 5,000 miles, personal use equals 3000, and commuting equals 2000 miles, your total miles for the year equal 10,000.
If you don't have exact records about your business use, you can sometimes use good sampling. Then, you can average this data to get good weekly estimates of your business, personal, and commuting miles.
But before you go out and buy a new luxury auto, you need to know there's another complication. Congress limits in most cases the amount of depreciation or lease rental that you can include in your vehicle expense calculations. The rules are a bit tricky, but essentially, for purposes of vehicle depreciation and lease payments, you only get to look at the first $17,000 (roughly) of vehicle cost.
Specially, the luxury auto limits mentioned above don't apply to sport utility vehicles that weigh more than 6,000 lbs. 179 depreciation couldn't be used to write off all of the cost of an expensive SUV in the year the vehicle is purchased.
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