News & Resource CenterTax Impact Newsletter
Should you donate your car to charity?
Donating an old car to a qualified charity may seem like a hassle-free way to dispose of an unneeded vehicle, satisfy your philanthropic desires and enjoy a tax deduction (provided you itemize). But in most cases, it’s not the most tax-efficient strategy. Generally, your deduction is limited to the actual price the charity receives when it sells the car.
You can deduct the vehicle’s fair market value (FMV) only if the charity 1) uses the vehicle for a significant charitable purpose, such as delivering meals to homebound seniors, 2) makes material improvements to the vehicle that go beyond cleaning and painting, or 3) disposes of the vehicle for less than FMV for a charitable purpose, such as selling it at a below-market price to a needy person.
If you decide to donate a car, be sure to comply with IRS substantiation and acknowledgment requirements. And watch out for disreputable car donation organizations that distribute only a fraction of what they take in to charity and, in some cases, aren’t even eligible to receive charitable gifts.
Why your college-age child needs an estate plan
Most college packing lists don’t include an estate plan, but a few basic documents can give you peace of mind as your son or daughter heads off to college. Without them, once your child turns 18, you’ll lose the right to access financial or medical information or make decisions on his or her behalf. Recommended documents include:
- A HIPAA authorization and health care power of attorney, giving you access to medical information and the ability to make medical decisions if your child is unable to do so, and
- A financial power of attorney, authorizing you to access your child’s financial records and handle financial matters while he or she is away from home.
Generally, a will isn’t necessary unless your child owns a significant amount of property.
IRS launches compliance campaigns
In recent months, the IRS’s Large Business and International Division announced 18 compliance campaigns that target specific business-related tax issues. Examples include:
- Section 48C energy credits. Only taxpayers whose advanced energy projects were approved by the Department of Energy and who have been allocated a credit by the IRS may claim the credit.
- Microcaptive insurance. The IRS focus here is on taxpayers’ attempts to reduce aggregate taxable income using contracts treated as insurance contracts and a related company that the parties treat as a captive insurance company.
- Related-party transactions. The target here is transfers of funds from a corporation to related pass-through entities or shareholders.
- S corporations. The IRS focus here is on losses claimed in excess of basis.