Jul 01 2009
The federal government’s recently announced new car sales tax deduction is terrific news if you’re planning to donate car to charity this year. With this program, you may qualify for two tax deductions – that’s right, two: one for the car you are donating, and one for the new car you purchase.
Much of the media talk around the subject of new car tax deductions has been focused on the Car Allowance Rebate System (the so-called “Cash for Clunkers” program). But, while this program may benefit some new car buyers with a trade-in vehicle, it does not pencil out for everyone.
Tax Deduction for New Car Purchase
For many, especially if you have a charity you support, the real value may be in the New Car Tax Deduction amendment to the Economic Stimulus Package. With this program, you can be eligible for a tax credit (a tax deduction against taxable income) equal to the sales and excise tax on your purchase of a qualifying new vehicle. (Click here to see the rules of this program.)
Tax Deduction for Car Donation
You still take your tax deduction for your car donation, too!
And, as the rules stand, your tax deduction on your donated vehicle equals the gross selling price. (Click here to see the federal brochure on car donations.) There are lots of reasons that donating your car may be the best option for you. For example, your vehicle may be worth more than the clunker payoff would allow; you or your car may not qualify for the clunker program; your tax situation may benefit more from a donation (your tax accountant can determine this for you).
Overall, too, there’s the benefit of donating a car to charity and helping your cause while also improving your tax situation this year.