Cars With Heart...

Donate your car or other used vehicle to the Orono Alliance for Education. Call 952-545-6873 for more information. Through our agent, Cars with Heart, we can arrange for pick up of your vehicle and provide a tax receipt letter. Your car will be sold and a percentage of the proceeds will go to the Alliance. It's a win-win situation. Call today! Cars With Heart FAQs Why donate a car to Orono Alliance? Simple - it's a win/win situation. You get a tax-deduction for the market value of the car; the Alliance receives a donation from the sale of the car to support our efforts. What has changed in tax laws regarding donating cars? Very little! The spirit of the law regarding car, boat or airplane has always been "the donor should take the fair-market value of the vehicle at the time of the donation." However, Congress recently passed a new law regarding deductions of donated vehicles. This law is a framework, and as such is incomplete. It is up to the IRS and future court rulings to finalize how this law will function. What we offer here is a simple explanation of this law as of 1/31/05.

1.	If you are donating a boat or plane, the philosophy - and practice - remains the same: deduct the fair-market value of your donation. Consult with your tax advisor to determine what the fair-market value of your donation is (and whether or not you need a professional appraisal as proof of this value).
2.	If you are donating a motor vehicle that has a fair-market value of $500 or less, you will continue to write off the fair-market value of the vehicle. Consult your tax advisor to determine the correct deduction.
3.	If you are donating a motor vehicle that has a fair-market value of more than $500, then here's how the new law currently works:
	A.	If the vehicle will require 'significant material improvements,' then you will continue to take the fair-market value of the vehicle as your deduction. If this fair-market value is over $5,000, you should get a professional appraisal of the vehicle (before donating it) as proof of your deduction. Consult your tax advisor to determine the correct value and appraisal process.
		How do you determine 'significant material improvements?' You don't, Cars with Heart does. They will pick up and examine your car and determine what improvements, if any, are necessary. They have devised a standard method for determining what constitutes 'significant material improvements,' in lieu of specific guidelines from the IRS or Congress. We will let you know if your vehicle qualifies as needing 'significant material improvements,' based on current interpretations of that phrase.
	B.	If the vehicle will NOT require 'significant material improvements,' then you will write off the value of the car once it sells. You can write off up to the full-value of the sale price (not blue book value) regardless of any costs incurred by us or our partner Cars with Heart. If the value we sell it for is over $5,000, you will still likely need a professional appraisal to back up your deduction. However, if the car is valued at more than $5000 by an appraisal but sells for a lesser amount, you may only claim the lesser amount on your tax return as the donation. Again, consult your tax advisor for final say on getting appraisals and any exceptions to this method of quantifying your deduction.

In other words, all that has significantly changed is determining how much work needs to be done on the vehicle, and, if little work is needed, then (and only then) should you wait until the car sells to determine the maximum amount you can write off. Does this new law mean I can't write off the car in the year that I donate it? Technically, that may be necessary. Again, if the car needs 'significant material improvements' than you will write off the car in the year it was donated, based on the value of the car at the time it was donated. Only if the car does NOT need 'significant material improvements,' meaning that then you should wait for the car to sell to determine the value, will the date of the donation be an issue. Our partner, Cars with Heart attempts to liquidate all cars within 60-90 days of pickup. If you donate a car between January and October of any year, you will likely know the sales value by the time you file your taxes for that year. If you donate it in November or December, you may not know the value by December 31. However, since you have until April 15 to file your taxes, you may still be able to write off the sale, as long as it occurs in time for your filing. (Again, this is based on current interpretations of the new law). If the car is not sold until after April 15, or you file your taxes before the car sells, then it is your choice to either wait and write off the car in the year it sells, OR assume a value to write off (and amend your taxes later if needed). Consult your tax advisor before making this decision. (Please be aware that information on this site is an interpretation of tax law and common practice as of 1/31/05. No information on this site should be taken as tax advice. Tax advice should only be given by a trained tax advisor.)