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Parameters change for donated cars

November 18, 2010
Effective Jan. 1, if the claimed value of a donated car exceeds $500, the taxpayer is limited to deducting the gross proceeds that the charity receives upon selling the car. Donors previously could deduct the "fair market value" of the vehicle. Also under the new law, charities have 30 days from the date of the sale to notify the donor of the sale proceeds. If the charity keeps the vehicle for its use or materially improves the vehicle, the charity must certify that in an acknowledgement to the donor. In such case, the donor could deduct the vehicle's fair value. The change, which comes as part of the American Jobs Creation Act of 2004, attempts to close a loophole that saw some taxpayers deduct thousands for junker cars they donated to charity.