New tax laws could affect your write-offs this year
October 15, 2007
By David Sharos Special to The SunWith the end of the 2007 tax year clearly in sight, one of the ways to affect your return is to make charitable donations. Many homeowners receive regular requests for smaller items, including books, clothing, outdated computers and the like. But what if 2007 is your year to consider giving away a bigger item, such as a car or a boat?
As the end of the tax year gets closer, some people think about making charitable donations for the tax benefits.
Here are some tips if you’re looking to donate items with a much larger write-off potential.
Charities in need of used cars abound, but Daniel Borochoff, president of the Chicago-based American Institute of Philanthropy, said the number of vehicle donations has dropped because of restrictions enacted by the Internal Revenue Service regarding their value.
“The issue with vehicles concerns whether they will be sold or used by the charity they are given to,” Borochoff said. “This affects the value and the tax write off you’ll be able to take.”
Before new tax laws took effect, people donating cars were able to check their value with online sources such as the Kelley Blue Book. Borochoff said figures from various sources were sometimes inflated. Since 2005, values are now determined by what the donated car actually sold for.
“People used to claim a deduction based on the market value, but some car values could change, depending on whether they were poor, fair, good or excellent,” Borochoff said.
A better strategy might be to give the vehicle away to a non-profit group that would actually use it, such as Meals on Wheels. The value of such a vehicle would then have to be determined by its current market value.
Naperville Cares, a local charity, seeks drivable cars for those needing to get to their place of employment or for medical reasons. Janet Derrick, co-vice president of the board, said the group’s car ministry picks up operable cars to give them to others who need a vehicle.
“We also repair cars that don’t require extensive work, and then give them to people in need,” Derrick said.
Al Dinon, chairman of the car ministry for Naperville Cares, said the group took in 101 vehicles during its last fiscal year. For tax purposes, he suggested getting an appraisal for vehicles worth more than $500.
“Donors do get to deduct what the car actually sold for, but for cars we give away, we suggest people get a professional appraisal for tax purposes,” Dinon said.
Rules regarding charitable donations may have tightened, but so have demands made upon charities receiving those donations. Susan Fritz, chief professional officer for Naperville’s United Way, said giving in the Naperville area has remained fairly stable over the past several years but that charities, like donors, are under more scrutiny regarding their practices.
“People want to know where their money or donations are going and if local people - their friends and neighbors and people in the community are going to be helped,” Fritz said. “In general, organizations have to work harder to measure outcomes. We are working today with a much more educated donor base.”
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