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You’ve probably seen or heard ads urging you to donate your car to charity. “Make a difference and receive tax savings,” one organization states. But donating a vehicle may not result in a big tax deduction — or any deduction at all.
Trade in, sell or donate?
Let’s say you’re buying a new car and want to get rid of your old one. Among your options are trading in the vehicle to the dealer, selling it yourself or donating it to charity.
If you donate, the tax deduction depends on whether you itemize and what the charity does with the vehicle. For cars worth more than $500, the deduction is the amount for which the charity actually sells the car, if it sells without materially improving it. (This limit includes vans, trucks, boats and airplanes.)
Because many charities wind up selling the cars they receive, your donation will probably be limited to the […]
An employee must include personal use of an employer-provided automobile in gross income. If not reimbursed by the employee, the personal use of the automobile is a taxable fringe benefit.
The employee must include in income the FMV (fair market value) of the fringe benefit reduced by (1) the amount, if any, paid for the benefit, and (2) the amount specifically excluded from gross income by statute (i.e., the portion attributed to use in the employer’s business).
The value of the fringe benefit as current compensation is subject to FICA (for non-agricultural employees) and FUTA, and must be included in the employee’s W-2. However, it is not subject to federal income tax withholding if the employee is so notified.
Methods to value the fringe benefit:
If your business provides automobiles to your employees, please consider contacting us to discuss your options.
Written by Mike Musson, CPA, Partner
