WARNING - Don’t donate your car until you read this

By: Robert Johnson

There was a tremendous buzz in the nation about the new car donation tax law that went into effect on January 1, 2005. This newest tax law will not affect any prior tax return, but will affect your 2005 tax deductions. While many community leaders say that the donations of automobiles, airplanes and boats will still benefit charities greatly, there are some huge changes in store for the taxpayers that once could look for some big write offs on their tax returns. The changes affect anyone who plans to check a “donate car 2005” block on a deduction form.

Now taxpayers are no longer able to estimate the fair market value of their donated vehicles for tax write-offs of more than$500 on any 2005 tax return. Except for a few yet to be clarified exceptions to the rules, any deductions over $500 on a 2005 tax form will be capped at the price obtained when the charity sells your car, aircraft or boat.

They will send you a written notification of that sales price that you can use for your deduction on your 2005 taxes. If you are hoping to have some huge deductions for charities on your 2005 tax online return, you will need to hope that the vehicle you donated brings a good price at auction. Even if you are filling out a late 2005 tax return, the rules regarding donations will remain in effect.

Many charities were realizing some amazing money from donated vehicles that they could sell for profit. They have been worried that this source of funds could take a dangerous fall when people realize that this deduction may not give them a large 2005 tax refund. Experts do not believe they have much to concern themselves about.

One of the reasons given for taxpayers donating these vehicles is that they need a convenient and quick way to rid themselves of autos, planes and boats that they no longer want or need. In most of these cases, the age or mileage of the cars would keep the owners from realizing top dollar at any rate. Donors that choose to give these items also do this from a true altruistic nature and they enjoy the feeling that they get from helping out others.