If you have bought a clean fuel vehicle, that is one with a gasoline engine and an electric motor, or one that runs on electricity you can avail a vehicle tax deduction. The former can get you a one-time tax deduction up to $ 2,000 while the latter can fetch you a one-time tax credit up to $ 4,000.
To qualify your vehicle as a clean fuel one, you must make sure that it runs on either of the following fuels: natural gas, LNG, LPG, Hydrogen or any other fuel that is at least 85% alcohol or less. You must remember that even though gasoline/electric hybrids use an electric motor, they are not eligible for electric vehicle tax credits.
Now what if your vehicle runs on dual types of fuel? In that case the cost you incur to convert the car into a clean-fuel user is up for deduction, subject to the stated limits.
There are other requirements as well. To get a tax break on your car, you must buy it first hand and drive it primarily within the USA. The vehicle should have four wheels and must not be used for commercial purposes. If any of the conditions change within 3 years of purchasing the vehicle, some of the money you had saved as tax deduction will have to go.
Now comes the part about vehicle donations. You may have seen several ads that ask you to donate your car and get a tax break. Technically the offer is true. But there are several things you need to consider. You cannot state the value of the car you are donating to be a cent more than its current market price. In effect the amount you can claim deduction for is the amount that a buyer would have paid had you sold it in the fair market.
This is not all. The amount of deduction will depend on the value of the car and how the charitable organization uses it. So, unusual as the situation might be, you will not have an idea about how much of a break your charity is going to fetch you. Also the organization you have donated to, must be recognized by the tax agencies.
Let’s say the charity you gave your vehicle to sold it off at a lower price than your stated value. Then the amount that you get a deduction for is the lower amount. If the charity on the other hand sells your car after using it over a period of time, you need not worry. The value of your car at the time of donation is what matters.
So if you are planning to give a car to charity, go ahead. Some one will benefit and the good part is so will you. The tax collectors will make sure of that.
