I received the following from a client earlier this week:

My husband has acquired a truck that he would like to give to a church as a donation.  The value of the truck is $10,000.00.  He is wanting to know if we can donate about half of the value and except payment from them for the rest.  Also, I can't remember if there is a cap on the amount of charitable contributions per tax year.  I believe year to date we have given approximately $5,000.

My Reply:

There is no dollar limit on deductions for charitable donations.  There is an annual limit of 50% of your AGI, with any excess carried over to the next year.

The rules for donating vehicles were just changed a bit last week in order to cut down on people claiming high Blue Book values for vehicles that were sold off by charities for much less.  They don't actually take formal effect until 1/1/05; but following them now wouldn't be a bad idea as protection against IRS challenge.

If the charity turns around and sells the vehicle after you give it to them or sell it to them at a discount, they must give you a written statement of what that sales price was, which will become the fair market value for your donation.  If you sell the truck to them for less than this amount, the difference can be claimed as a charitable donation.

If the charity actually keeps and uses the vehicle, the value will need to be based on an appraisal if more than $5,000 is being claimed, and other methods (Kelly Blue Book, newspaper ads) if the value claimed is less than $5,000.

Let me know if there are any other questions.

Kerry

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 10/28/2004 01:42:00 PM Send this post: