Tax Write-Offs For Donated Cars Get Trickier

[DocDon]

New Law to Take Effect January 2005

November 2, 2004

A new law takes effect Jan. 1 that will make getting your tax deduction more complicated if you donate an old car to charity next year.

You will not be able to base the value of the vehicle on a guide like the Kelley Blue Book. Instead, Kelley Blue Book spokeswoman Robyn Eckard said you'll need an auction sale price.

Your car will be taken to auction, and later, the auctioneer will report back to the charity on what the vehicle sold for. Then, you'll be informed. From the time you make your donation, it could take several months before you have a price to report on your tax form.

Kelley Blue Book is advising people who are interested in taking the deduction to move quickly. Eckard said if you want to avoid the new process, you should give up your car before the end of this year and take the full, fair market deduction on your 2004 return.

When old cars are sold at auction, charities typically collect far less than the fair market value. The IRS requested the rules change because it said people were abusing the donated vehicle write-off.