[michel.pete]

I'm an independent contractor in need of some tax write-offs. It was suggested to me by an accountant that I purchase a car for a few hundred dollars, and then sometime during the year, donate it to a specific charity (a local church) that offers a minimum $1,000 tax write-off for car donations.

[ihyln]

Sounds like a good way to commit fraud.

[darkphantom]

Originally Posted by ihyln

Sounds like a good way to commit fraud.

no one has to know...

[Andy M]

...except if you purchase a car for $100, you'll have to show on your books that there was a purchase of $100. Books will show that $100 left your cash assets and went into your depreciable assets (car). I'm not quite sure but I don't think you can get a tax receipt for $1000 if you donate $100. It's like if I were to donate $1 to a church, I'd get a tax receipt of $1, not $100.

Now if you were to say purchase the car as a personal asset for $100 and then your company were to purchase it from yourself for $1000, that would mean a cash transfer of $1000 from your company to yourself (which becomes part of your taxable income). Then when you donate it to the charity, you get a tax receipt of $1000.

...just means you won't get taxed the corporate rate of $1000 but you will with the personal rate (which is lower). Not fraud but not a whole lot of benefit either in my opinion. What you'll "save" is going to be offset by an accounting mess that your accountant has to do. Plus you might get flagged for an audit which will cost you much more than your yearly accounting review. The only way to really benefit on this is to cook the books and say that the car was purchased by your company for $1000 (though you paid $100) and then you get the refund for $1000 later on...which is ILLEGAL.

Even in Canada with our high corporate rates, you might save...$200? It's not worth the hassle in my opinion (or the fact that it might flag you for an audit).

[E90Brian]

Why not buy a house there in beautiful "michel.pete" with a big mortgage. Then you can take the deduction for the interest. At least that's legal and ethical.

[CalRick]

I don't know who your accountant is or what his qualifications are, but he doesn't seem to be doing you any favors. The IRS has gotten wise to the old trick of over-valued car donations. Most charities that I've seen lately soliciting car donations talk about you getting a deduction for the value that they (the charity) actually get for the car. Perhaps your accountant is angling for more billable hours when representing you at audit? The days of you declaring a fair market value of high blue book for your unsaleable heap are over.

As others have said, you might get away with it, but is it really worth the trouble?

It might be worthwhile if you have a new M3 and suddenly converted to the church of Ed Begley Jr. and were swearing off such evil things, then you could legitimately write off the book value of your presumably pristine former pride and joy. But even then, would it make sense to get a deduction worth maybe 35% of the cars value when you could just sell it and take the cash?

[noro]

Don't feed the troll people...

[glamprecht]

www.scamorama.com

[nicknaz]

Originally Posted by michel.pete

I'm an independent contractor in need of some tax write-offs. It was suggested to me by an accountant that I purchase a car for a few hundred dollars, and then sometime during the year, donate it to a specific charity (a local church) that offers a minimum $1,000 tax write-off for car donations.

You should consider getting a new accountant. Vehicle donations have recently become a 'red flag' for IRS auditing, and I'm shocked your accountant recommended that course of action

Even though it is true that vehicle donations under a certain threshold do not need independent appraisal, you'll likely be asked for photos and other proof of the car's value.

Also, most places will not accept beaters because the cost to dispose of them is greater than the value of the parts.

[John 070]

Originally Posted by ihyln

Sounds like a good way to commit fraud.

And he makes the statement on a forum....

[tjnptel1]

Originally Posted by ihyln

Sounds like a good way to commit fraud.

i wouldn't consider finding a loop hole a fraud. :dunno:

If that was the case, then every single american is guilty as sin.

[tjnptel1]

Originally Posted by John 070

And he makes the statement on a forum....

yeah, now that's just dumb. us op

[FastLane]

Buy the car for $100 as a "company vehicle" and write off the gas you use with it (or the gas you consume with your 3 and manually wind back the odo on your $100 automobile to CYA, shhhh!)----if you havent written that off already and if your accountant hasn't, well, dont need to be Einstein to figure out what to do.

[ihyln]

Originally Posted by tjnptel1

i wouldn't consider finding a loop hole a fraud. :dunno:

If that was the case, then every single american is guilty as sin.

There's a difference between buying a $1000 car then writing off $1000 and buying a $100 then writing off $1000. I'm shocked that I have to explain this again after Andy M posted in detail.

[Hanjob]

Originally Posted by ihyln

There's a difference between buying a $1000 car then writing off $1000 and buying a $100 then writing off $1000. I'm shocked that I have to explain this again after Andy M posted in detail.

+1

just don't do it

[pony_trekker]

Originally Posted by ihyln

Sounds like a good way to commit fraud.

I think he's talking about buying a used car cheap then later donating it after having used it. I assume he's talking about actual or close to actual values.

And in any case it's dumb. What, drive around in a junker just so you can get a thousand dollar write off?

Here's another tip: if you lease a car you can write part of it off too.

[F87LUV]

have fun getting audited... irs is cracking down on charitable contributions.... and all for what?? a $500 deduction off of your return... remember- its 50% [or less depending on what you contribute] of the donation that you deduct not 100%

[tom.greag]

First of all, no, it doesn't work like that. Second of all, even if it did, it would likely cost you money, not save you money.

1) Until a few years ago, you used to be able to deduct the fair market value of a Car Donations Connecticut. Then Congress changed the rules to eliminate a lot of the fraud that was taking place. Now, unless the charity you donate the car to intends to keep the car and use it for its charitable purpose (in which case you can still deduct the FMV), you can only deduct the amount the charity actually sells the car for (they have to provide you with a statement telling you this amount after they sell it). So, in the latter case, they obviously aren't going to sell the car that you bought for $500 for $1000 -- unless you got some amazing deal when you bought it. Since they will probably sell it at a wholesale auction, you'll be lucky if they get $300 for it, which is all you could deduct. On the other hand, even if the charity intends to keep and use your donated car, you can only deduct the FMV. What is the FMV? It is the price a buyer would be willing to pay for the car on the open market. If you just bought the car for $500 that is a pretty good indication that the FMV is $500. And that would be your donation.

2) Even if, by some miracle, you could deduct $1000 for that car that you just bought for $500, you would still lose money on the deal. Why? Because a tax deduction is not "deducted" from the amount of tax that you owe (that is what a "tax credit" is). Rather, a deduction is deducted from your income, before the amount of tax is calculated. The actual cash value to you of a deduction is the deduction multiplied by your tax bracket. For example, let's say that you are in the 25% tax bracket (for a single person, that would mean taxable income -- after all of your deductions and exemptions -- between $31,851 and $77,100; for a married couple filing jointly, taxable income between $63,701 and $128,500). A $1000 deduction only lowers your federal tax bill by $250. So you would wind up $250 in the hole after paying $500 for the car. Even if you are in a state with a high state income tax rate of 10%, you would still be in the whole $150. Your combined federal and state tax rate would have to exceed 50% for your example to save you any money at all, which is pretty much impossible since the top federal rate is 35% (for income exceeding $349,701), and I don't think any state's top rate is 15%.

Incidentally, as an indpendant contractor, you can deduct a lot of things as business expenses (depending on what your business is). You should talk to an accountant about this (rather than car donation schemes).

[simp0man]

Sounds like a plan, the IRS is always screwing us. Let Karma do its thing. How much does it go to the right places we want it to.

[tom.greag]

First of all, no, it doesn't work like that. Second of all, even if it did, it would likely cost you money, not save you money.

Until a few years ago, you used to be able to deduct the fair market value of a donated car. Then Congress changed the rules to eliminate a lot of the fraud that was taking place. Now, unless the charity you donate the car to intends to keep the car and use it for its charitable purpose (in which case you can still deduct the FMV), you can only deduct the amount the charity actually sells the car for (they have to provide you with a statement telling you this amount after they sell it). So, in the latter case, they obviously aren't going to sell the car that you bought for $500 for $1000 -- unless you got some amazing deal when you bought it. Since they will probably sell it at a wholesale auction, you'll be lucky if they get $300 for it, which is all you could deduct. On the other hand, even if the charity intends to keep and use your donated car, you can only deduct the FMV. What is the FMV? It is the price a buyer would be willing to pay for the car on the open market. If you just bought the car for $500, that is a pretty good indication that the FMV is $500. And that would be your donation.

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donate a car to charity - together everyone achieves more!
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car donations in ct

[ska///235i]

what if my dad has an old car and passes it to me...then I donated
Can I write that off?

[Kiemyster]

Originally Posted by ska

what if my dad has an old car and passes it to me...then I donated
Can I write that off?

yeah. once the title is in your name.