The Military Home Programs' Blog

Have you seen or heard those ads to donate your car to charity and get the tax deduction? Well watch out, the IRS has changed the rules and your deduction is now limited to the amount the charity receives when they sell your automobile, NOT the actual value of your vehicle. In the past, tax accountants used the “blue book” value to estimate your deduction, but this is no longer the case. So here is what you need to do to protect yourself:

ü Check that the organization is an eligible organization (see Publication 78 online at www.IRS.gov or check your local library)

ü Remember that only taxpayers who itemize deductions on Schedule “A” get credit for charitable contributions

ü Make sure you get a Form 1098-C from the charity within 30 days of the vehicle selling. It has to be filed with your taxes to get the deduction.

What about other contributions to charities? Well if you donate money, Uncle Sam is going to want proof (a bank record, canceled check, credit card receipt, or a direct receipt from the charity). If it’s $250 or more, a receipt from the charity is mandatory. This new rule starting in 2007 does not allow you to use your personal diaries, notes, or registers for proof any longer, so now is the time to start ensuring you collect your receipts.

For clothing and household items, they must be in good used condition or better. The problem is, the IRS has yet to tell us how they define “good used condition or better”. So once again, to protect yourself, get a receipt from the charity that includes a description of the donated property. If you leave the donation at an unattended drop site, keep a written record of the donation that includes a description of the property and its condition – photos of the donated items also work well.