Car died: Donate or sell?

[Chicago Desi]

All,

My car died today. It needs an engine replacement and is otherwise in not too bad a condition. That expense of changing engines will be higher than the blue book value of a car in decent condition. Hence, I left it at the service station and procrastinated making a decision on what to do with it.

As far as I know, I have two options:
1. Sell to dealer or trade in (will likely get $500 or $1000 if I trade in and bargain real hard). I am not looking to buy the same brand again, so haggling with these guys for a new car is not something I am looking to do. So, most likely will get $500 max.
2. Donate to charity like Salvation Army and have them tow it away. Will be able to write off a bigger amount. The blue book value with a good engine is slightly less than $4000.

Do I have any other options? What do you recommend? Is option 2 the best way to move forward? What are things to consider or watch? How much can I write off if I donate?

Thanks in advance.

[cyberabadi]

I would donate it if I am not getting much. Print the current KBB or Nada Value of the car retail price for an excellent condition and do a paper filing (Tax Return for 2007) and enclose the copy of KBB/Nada Value. This is what I did in 1999 or so and had no questions. But, I used a Tax specialist then. So, you have to do a bit of DD.

[Chicago Desi]

Thanks cyberabadi! Who did you donate to? Did they tow?

[Desi_by_Nature]

Donate to charity like Salvation Army and have them tow it away. Will be able to write off a bigger amount. [/quote]

C_D, car donation tax laws have changed since 2005.
Earlier you could write off anything you want, but since 2005 if you are deducting over $500 then the charity has to provide documentation on how much they were able to sell the car for and that's what you have to report on your taxes.

http://www.donationline.com/taxdeduction.htm

[Desi]

CD,

I donated my car to American Lung Association about 10 years back. The car was in good working condition with no body damage and fully drivable - they still got it towed at their expense (I guess to drive it would mean liability insurance, having a driver to drive etc).

I do not know what the current tax regulation is re donated cars - from what I recall they were making some changes.

[Bobus]

Cannot, legally, deduct blue book value if car has damage like engine failure. Deduction is limited to fair marketvalue.

http://www.irs.gov/publications/p561/ar02.html#d0e806

Extract

If you donate a car, a boat, or an aircraft to a charitable organization, its FMV must be determined.

An acceptable measure of the FMV of a donated car, boat, or airplane is an amount not in excess of the price listed in a used vehicle pricing guide for a private party sale, not the dealer retail value, of a similar vehicle. However, the FMV may be less than that amount if the vehicle has engine trouble, body damage, high mileage, or any type of excessive wear. The FMV of a donated vehicle is the same as the price listed in a used vehicle pricing guide for a private party sale only if the guide lists a sales price for a vehicle that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated vehicle.

[Chicago Desi]

Cyberabadi, DBN, Desi, Bobus,

Thanks much for the inputs. I found the following pdf with examples:

http://www.irs.gov/pub/irs-pdf/p4303.pdf

Looks like I have to have proof of how much the car was sold for from the charity and can deduct that amount only.

[Desi]

By the way, the targeted ads on this webpage had a car donation ad at the top, I am posting the link below:

http://www.hellometro.com/Marketplace/Car_Donation.cfm

[harsha25]

what kinda car is that

[Bobus]

ChicagoDesi:

That link you posted is useful.

You need proof of what the charity sold the car for if it sells it. If not, need to arrive at FMV, which is not blue book price since your car has engine failure.