From the Better Business Bureau

Starting this year, a new law makes big changes in the rules for donating used cars (and other items like boats and planes) to charity.
Since many folks in Minnesota make these types of donations to receive tax deductions, this rule may have a significant downside for both the donors and the charities themselves.

Under the new rules, if the claimed value of the donated motor vehicle exceeds $500 and the vehicle is sold by the charity, the taxpayer is limited to the amount the charity receives for the vehicle. The charity must send a notification to the donor within 30 days of the sale stating the amount of the gross proceeds.

In past years, taxpayers were able to deduct the ìfair market valueî of the car. This was a guess of the price the car would sell for in its current condition. But many consumers abused this rule and claimed the ìbluebookî value for cars that were in terrible condition. Some charities even encouraged this dishonest practice and advertised that they would be able to get ìtop valueî for their car donation. The IRS has now closed this loophole.

Many legitimate charities still deeply appreciate donations of cars or boats and derive significant income from selling them. And the deductions are still a nice benefit for those with an old car that they just want to dispose of. If you are interested in such a donation, here are some tips from the BBB:

ï First, verify that the recipient organization is tax exempt as a charity. Visit the IRS Web site and search Publication 78, an annual, cumulative list of most organizations qualified to receive deductible contributions. Publication 78 is also available in many public libraries.

ï Make sure the title of the car is transferred to the charityís name and keep a copy of this record.

ï Find out how the charity financially benefits from the resale of the vehicle.

ï For tax records, take a photo of the car and keep copies of current classified ads or guide value estimates for similar vehicles. For more information, get a copy of IRS Publication 561, Determining the Value of Donated Property.

Check out the charity with the Minnesota Charities Review Council at www.crcmn.org or the BBB Wise Giving Alliance at www.give.org.

Remember to also check out companies before you buy. Visit the Better Business Bureau Web site, www.mnd.bbb.org,. If you have a complaint, use the form on the Web site or write: BBB, 2706 Gannon Rd., St. Paul, MN 55116. The office serves all of Minnesota and North Dakota.

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