Kevin McCormally: I am Kevin McCormally of Kiplinger's and I am here with Mark Solheim, Automotive Editor of Kiplinger's Personal Finance Magazine to talk about donating your car to charity. Mark, I know there have been big changes in the tax rules on what happens when somebody gives a car away. What's happening?
Mark Solheim: For years, Congress spreaded that the public was ripping off the the IRS by taking two generous deductions for clunkers that they donated to charity because people were allowed to set the fair market value of the car themselves.
Kevin McCormally: Okay, so what's the rule now ?
Mark Solheim: The rule now is that when you give a car to charity, you must wait until the charity actually sells the car and then supplies you with the form that gives you the gross proceeds.
Kevin McCormally: So your deduction is limited to what the charity gets when it sells the car at auction.
Mark Solheim: Exactly.
Kevin McCormally: So are we going to get bigger deductions or smaller deductions because of this change?
Mark Solheim: You are going to get a smaller deduction. Okay, I will give you an example, say you want to donate a Honda Accord, a 10-year old Honda Accord and you look at, say Kelley Blue Book.com and see that the value, if sell to a private party is about $4000. Now, the charity will sell the car but it sells that at whole sale value at auction, so you are going to get hundred of dollars less.
Kevin McCormally: So you are going to get less money than you allowed under the old rules. How long is it going to take for the charity to send you this piece of paper saying the car has been sold?
Mark Solheim: Most of the time you will get a sort of paper within a month or so, sometimes it might take a little bit longer.
Kevin McCormally: So does it make sense to give your car to charity or should you sell it yourself?
Mark Solheim: You can get more bang for your charity but if you sold the car yourself and then wrote a check to the charity for the amount you got.
Kevin McCormally: Okay, thanks Mark.
