A Smart Time To Hand Over The Keys

By Barbara Kiviat

If you're thinking of donating a car to charity, it may make sense to do so before the end of the year. That's because starting Jan. 1, the rules for deducting the car's value from your taxes become much less favorable. Under the current system, you may use the car's fair-market value--what people call the Blue Book value--no matter what the charity does with the vehicle. But beginning next year, if the car is valued at more than $500 and the charity sells it to get cash, which many charities do, you are allowed to take only the amount collected from the sale. That could be far below the Blue Book figure. If the charity keeps the car, you can deduct fair-market value, but only if you get a letter detailing the intended use. One thing that hasn't changed: If you donate a car worth more than $5,000, you need an independent appraisal. --By Barbara Kiviat