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Why Not Give that Car Away?

Article

The economy is soft, and the used-car market may even be softer. The car you’re driving has lost a big chunk of its value and a dealer isn’t likely to offer you an attractive trade-in allowance. Why not give it to charity and take a tax deduction? A few years ago, that wasn’t a bad option. You were able to write off the fair market value of the car and all you had to do was look it up in a guide like the Kelley Blue Book and deduct that amount.

The economy is soft, and the used-car market may even be softer. The car you’re driving has lost a big chunk of its value and a dealer isn’t likely to offer you an attractive trade-in allowance. Why not give it to charity and take a tax deduction?

A few years ago, that wasn’t a bad option. You were able to write off the fair market value of the car and all you had to do was look it up in a guide like the Kelley Blue Book and deduct that amount. Then Congress caught on to the fact that a lot of car owners were taking big write-offs for clunkers that netted the charities far less than the amount of the deduction. The lawmakers decided to limit the value of any deduction over $500 to the actual amount that the charity gets when it sells the car. Most big-name charities auction off donated cars, generally to used-car dealers, and usually end up getting a fraction of the book value for them.

But wait…there is a little-known loophole in the tax code. If you donate the car to a charity that then turns around and gives it to a low-income family, or sells it to them at a steep discount, you can write off the full market value of the car. At Opportunity Cars (http://www.opportunitycars.com/), you’ll find a database of more than 150 charity organizations that will use your donated vehicle to help a needy family with its transportation needs—and maximize your tax break at the same time.

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice