Go to Jeff Salisbury LWGate Home Page.From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: auto donation
Date: Tue, 30 Mar 1999 19:05:27 -0500
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>I will be buying a new car shortly. I want to donate my old clunker to
>charity.,Will my income be reduced by the amount of the blue book value? or
>will my actually taxes owed be less the blue book value? In other words,
>Lets say the car is worth $1000 and I make $50000 a year in salary. Will I
>pay taxes on $49000 (50k - 1k) or will I pay taxes on 50k then have apply a
>tax credit of 1k?
(1) It's not what the blue book says that counts, it's the actual value of
your car. So if the BB says your car is worth $3000, but your car is
in a lot worse condition than the "reference car" that the BB bases its
numbers on, you're cheating if you use the $3000 figure.
(2) You can only get the tax benefit of the donation if you itemize your
deductions. And for the vast majority of people, it only makes sense
to itemize if total itemized deductions are greater than the
standard deduction. So if the std deduction is greater than your
total itemized deductions, you won't get any tax benefit from the
donation.
(3) Assuming you get the benefit of the donation, it'll reduce your
taxable income. The way things work is that you compute your
gross income. You then apply certain things to it (like alimony,
deductible IRA contributions, student loan interest, etc) to arrive
at adjusted gross income. From that you subtract your deductions
(by they itemized or standard) and personal exemptions to arrive at
taxable income, which is what you are taxed on. Assuming you are
already itemizing, the donation will increase your itemized deductions
by $1000, which will reduce your taxable income by $1000, and thus lower
your taxes by $1000 times your marginal tax rate.
Rich Carreiro
rlcarr@animato.pn.com
P5-100/RedHat Linux 4.2
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