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Author: vpotluri Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121096  
Subject: Deduction for donationg car Date: 12/22/1998 8:19 AM
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I have a car that I want to donate. My wife & I differ on when to donate. This year our gross income will be about $60,000. Next year it will be about $200,000.

Which year is best to donate the car for deduction? Would it be better for me to donate it this year and take deduction now or wait till January and donate it to take deduction from 1999 taxes?

If the deduction is for $5000, does it really make a difference if we donate next year (I mean paying taxes on $200K vs. $195K. Will we be in the same tax bracket?).

Will we get more tax benefit if we donate next year as opposed to this year?
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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7493 of 121096
Subject: Re: Deduction for donationg car Date: 12/22/1998 6:55 PM
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[[ I have a car that I want to donate. My wife & I differ on when to donate. This
year our gross income will be about $60,000. Next year it will be about
$200,000.]]

Well, I don't know the character of the income from this year to the next, but if it is all taxed at ordinary income, it is certain that your marginal tax rate would rise next year. Most likely substantially rise. Perhaps from the 28% bracket to the 36% bracket.

[[ Which year is best to donate the car for deduction? Would it be better for me to
donate it this year and take deduction now or wait till January and donate it to
take deduction from 1999 taxes?]]

Given the very sketchy income information that you provided, it seems as is you would be able to generate an additional deduction in the amount of about 8% of the value of the auto if you wait until next year. But there may also be some other things in your tax return that cause you reason to pause.

[[ If the deduction is for $5000, does it really make a difference if we donate next
year (I mean paying taxes on $200K vs. $195K. Will we be in the same tax
bracket?). ]]

Again, without knowing MUCH more about your specific tax issues, I can't say for certain. But, again, if this increase is due to an increase in "ordinary income", you can certainly expect your tax rates to rise unless your itemized deductions rise right along with your income.

[[ Will we get more tax benefit if we donate next year as opposed to this year?]]

Again, I don't know because I don't know your full tax history and infomation. But it would certainly seem logical that you would receive much more benefit from a 1999 donation as opposed to a 1998 donation.

If you would like to read more about the contribution of property, see IRS Publication 526 at the IRS web site.

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Roy

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