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The Kelley Blue Book used to be invaluable for people trying to decide how to value their car for charity donation purposes. Now, IRS regulations have become much stricter and clearer about how such vehicles should be valued. Here’s a summary of the changes…

In particular, the new guidelines affect vehicles which are in very poor condition and probably unroadworthy. In the past, these cars would have been given a pricing out of the Kelley Blue Book. They would have fallen under the ‘poor’ category (legal and safe to take onto the road) even though they were death-traps! Obviously, many of these cars ended up being scrapped or sent to auction. The IRS decided to do something about this discrepancy and stop people from taking deductions based on this ‘fair’ category as it didn’t reflect the true value or condition of the car.

Over half a billion dollars were deducted that didn’t reach the various charities and non-profit organizations all because of the Kelley Blue Book!

To make matters worse, many for-profit companies got involved in donations and sales for non-profit organizations and this made the tax loophole even larger and more widespread. Tax dodging on a huge scale became commonplace.

Now the IRS have clarified the situation by encouraging people to choose a value for their vehicle that somebody else would pay if it were for sale. No more distorted, high values.

Also, if the vehicle is worth less than $5,000, the value claimed has to be the sale value of the car, even though it may be less than the car’s true worth. The Kelley Blue Book price is taken out of the equation.

If, on the other hand, your car is worth over $5,000, then it needs to be photographed and verified by an independent auditor. They don’t have to be included with your tax return, but Form 8283 must be. As you can see, the tax loophole has been near eliminated!

The Kelley Blue Book can still be used to help you work out what somebody might pay for a similar car to yours, it’s just that you can no longer simply take the highest value from the book.

At the end of the day, you can often claim up to $500 and don’t forget that donating a car to a charity is an excellent way to have a positive effect on your local community. And that, is priceless!