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Avoid potential pitfalls when donating an automobile to charity

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June 30, 2004 The Internal Revenue Service posted on its Web site two new publications dealing with car donations as part of an effort to help taxpayers avoid potential pitfalls when they donate automobiles to charities.

The first publication, Publication 4302, “A Charity’s Guide to Car Donations,” addresses issues that charities need to know to properly operate car donation programs. The second publication, Publication 4303, “A Donor’s Guide to Car Donations,” is focused on individuals who make such donations.

In recent years, the number of car donation programs has increased dramatically. This growth, however, has taken place without taxpayers and charities always understanding their obligations under tax law. Both publications are intended to assist individual taxpayers and those operating car donation programs to comply with tax law.

The publications, each at six pages, were written in conjunction with state charity officials as part of an ongoing effort by state and federal officials to work together to educate taxpayers and charities.

“We want people and the charities to make sure they are taking the proper steps involving vehicle donations,” said IRS Commissioner Mark W. Everson. “Supporting charitable activities through tax deductible contributions is an important element of tax law and serves the national interest. But we encourage people to proceed carefully when donating vehicles. There are instances where the donations may provide little benefit to the charity.”

“A Charity’s Guide to Car Donations” provides descriptions of several different car donation programs, filing and disclosure requirements for charities operating these programs and related information. Included among the description of vehicle donation programs is an example of an arrangement that would fail to preserve the deductibility of a contribution.

“A Donor’s Guide to Car Donations” reminds taxpayers that they need to make sure they are donating their vehicle to a qualified organization, receive a written acknowledgement from the charity, keep records and properly assess the fair market value of their vehicle.

Access the PDFs at www.irs.gov.

If you have any questions about this letter, about charitable giving in general, or about any other tax or financial planning issues, please don't hesitate to call. We are at your service.