What are the tax benefits of donating a car to the Good News Mountaineer Garage?

If your car can be repaired and provided to a family you can deduct the fair market value as a charitable contribution provided you file an itemized federal income tax return (See the pdf file IRS Bulletin 2005-25). West Virginia residents may also be able to receive a state tax credit. GNMG receives a limited number of state tax credits so be sure to ask if they are available. If you have specific questions about how a car donation will affect your tax liability, you should consult an accountant or other tax professional. Tax information is also available at www.irs.gov.

WASHINGTON - The Internal Revenue Service announced today that taxpayers who buy a new passenger vehicle this year may be entitled to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns next year.

"For those thinking about buying a new car this year, this deduction may give them a little more drive to make their purchase this year," said IRS Commissioner Doug Shulman. "This deduction enables taxpayers to buy now and get cash back later on their tax returns."

The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.

The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.

IRS also alerted taxpayers that the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction.

The special deduction is available regardless of whether a taxpayer itemizes deductions on their return. The IRS reminded taxpayers the deduction may not be taken on 2008 tax returns.

The tax law did change. You may have heard that tax deductions for cars donated to charities are no longer allowed. Not true. The deduction will continue. However the method of calculating the deduction has changed. Effective January 1, 2005, the IRS issued new rules regarding tax deductions for vehicles donated to charities. Those rules limited the amount taxpayers can deduct to the amount the vehicle is sold for.