If you have an auto, boat, or airplane that you no longer want and choose to donate it to a charity, be sure to follow these guidelines.
The charity needs to provide you with either a 1098-C [see a copyhere] or a written contemporaneous acknowledgment of the contribution which states:
The donor
The taxpayers social security number
The charities federal ID number
The vehicle ID number
A description of the vehicle
A good faith estimate of the value of any goods or services provided by the charity in exchange for the vehicle, or if none then a statement that only intangible religious benefits were received.
If the charity sells the vehicle, the sale must be at arm’s length, and the sales price must be listed. Your donation will be limited to the amount of sales proceeds unless it is was sold at a discount to further the purpose of the charity.
If the charity keeps the vehicle for use, the letter must state the use and time frame the charity will use the vehicle and that the vehicle will not be transferred before the use is completed. Your donation will be the fair market value.
If the donation is greater than $5000, you will need to have a qualified appraisal done on the vehicle. This appraisal will be attached to your return when you claim the donation.
Keep in mind that donated vehicles are an area that the IRS has cracked down on because of abuse, and that claiming this deduction will increase your chance of being audited. This shouldn’t discourage you from taking the deduction, but just encourage you to make sure you do everything by the books.
Be careful that your car meets the cash for clunkers standards. Apparently the EPA adjusted their numbers at the last minute and some cars that qualified before do not meet the standards now.
If you've wanted to open a Roth IRA because of the long term tax benefits but have been told no by the IRS because of your income levels, then there is a limited time opportunity for you. You can make a non-deductible traditional IRA contribution in 2009, and convert it to a Roth IRA in 2010. This is a back-door method that is available in 2010 only. You will owe tax on the growth in the traditional IRA when you make the conversion. The conversion of the original contribution amount ($5000) will be tax free since it was nondeductible to begin with. For more info, click here.
If you claim the standard deduction because it requires less documentation and paperwork, the IRS has something to say to you. They are adding a new form for those who take the standard deduction, but who also claim some of the optional additional deductions like real estate taxes. This will likely apply to those who have a small or no mortgage interest deduction, but do own a home (retired individuals generally). So much for tax code simplification I guess.
This is not a popular deduction, and few people probably realize it is even an option. But if you have a casualty loss then you can write that off, even if it is a personal asset (like a car or home). [Usually personal losses are not allowed and only business losses can be deducted, but this is the exception].
Your loss has to be the complete or partial destruction of property resulting from a sudden, unexpected and unusual identifiable event. This rules out natural wear and tear (like the need for a new roof after 20 years or an AC unit after 10). However, if the damage is the result of:
Fires, either started by, for example, an electrical short or a lightning strike;
Storms, such as tornadoes, ice, hurricanes and the like;
Floods or, in some cases, droughts; and
Burglary or theft
Earthquakes and mudslides.
then you probably have a loss that you can claim.
You have to reduce your claim by any insurance money your receive. The claim is also limited in other ways by the IRS formulas, basically making it worth your time and effort to only claim large casualties.
Most people are familiar with the sales tax holiday for school supplies and clothing that his coming up Aug 7-9. It can be a chance to save 6.75% on that new computer you need or those new shoes you've been eying.
But did you know NC also has a sales tax holiday coming up in November? That's right, another tax amnesty is coming up Nov 7-9 on energy star qualified products. So if you need a new "Clothes washer, freezer, refrigerator, central air conditioner, room air conditioner, airsource heat pump, geothermal heat pump, ceiling fan, dehumidifier, or programmable thermostat" then this is just for you. Note that these have to be purchased for personal (not business) use. More details can be found here.
On July 24th the final phase of the federal minimum wage increase went into effect. That makes the current minimum wage in NC $7.25. To read more about this change, as well as some of the exceptions to this rule, you can go here, or here.
The content on this blog (www.acollinscpa.blogspot.com) is my personal opinion based on my study and understanding of tax laws, policies and regulations. It’s provided for your private, noncommercial, educational and informational purposes only. It’s not a recommendation or endorsement of any company or product. It should not be relied upon as specific tax advice for your personal situation. I strongly suggest that when it comes to filing your taxes, you get additional, professional guidance from individuals who are familiar with your specific circumstances. Those who choose to rely solely upon the information on this site do so at their own risk and peril, and cannot hold the author liable in any form or fashion.
IRS CIRCULAR 230 DISCLOSURE REQUIREMENT: IRS Circular 230 requires us to notify you that any tax advice contained in this communication is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding tax penalties that may be imposed by law.
About the Firm
Andrew K. Collins CPA PLLC is based in Raleigh, NC and serves the triangle area with high quality tax planning and preparation, audits of homeowners associations, and bookkeeping services.
