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Donating a Car to Charity

If you donated a car to a qualified charitable organization in 2017 and intend to claim a deduction, you should be aware of the special rules that apply to vehicle donations.

Note: You can deduct contributions to a charity only if you itemize deductions using Schedule A of Form 1040.

Charities typically sell donated vehicles. If the vehicle is sold by the charitable organization you donated it to, the deduction claimed by the donor (you) usually may not exceed the gross proceeds from the sale. If the donated vehicle sells for less than $500, you can claim the fair market value of your vehicle up to $500 or the amount it is sold for if less than fair market value.

The taxpayer can generally deduct the vehicle's Fair Market Value (FMV), if:

● The charitable organization makes a significant intervening use of the vehicle, such as using it to deliver meals on wheels.

● The charitable organization donates or sells the vehicle to a needy individual at a significantly below-market price, if the transfer furthers the charitable purpose of helping a poor person in need of a means of transportation.

● The charitable organization makes a material improvement to the vehicle, i.e., major repairs that significantly increase its value and not mere painting or cleaning.

If the donated vehicle sells for more than $500 and your deduction is $500 or more you must obtain written, contemporaneous (timely), acknowledgment of the donation from the charitable organization. You must also attach Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, to your tax return.

The written acknowledgment generally must include your name and taxpayer identification number, the vehicle identification number, the date of the contribution, and one of the following:

● a statement that no goods or services were provided by the charity in return for the donation, if that was the case

● a description and good faith estimate of the value of goods or services, if any, that the charity provided in return for the donation, or,

● a statement that goods or services provided by the charity consisted entirely of intangible religious benefits, if that was the case.

Note: If the written acknowledgment does not contain all of the required information, the deduction may not exceed $500.

For more information about donating a car to charity please contact Pinell & Martinez, CPAs at 985.327.7311

Five Tax Breaks that Survived Tax Reform

Recent tax reform legislation affected many provisions in the tax code. Many were modified, either permanently or temporarily, while some were repealed entirely. Here are five that survived.

1. Mortgage Interest Deduction

While the House bill repealed the mortgage interest deduction, the final version of the act retained it, albeit with modifications. First is that the allowed interest deduction is limited to mortgage principal of $750,000 on new homes (i.e., new ownership). For prior tax years, the limit on acquisition indebtedness was $1 million. Existing mortgages are grandfathered in, however, and taxpayers who enter into binding contracts before December 15, 2017, to close on the purchase of a principal residence before January 1, 2018, and who purchase such residence before April 1, 2018, are able to use the prior limit of $1 million.

2. Personal Taxes: State and Local Income Tax, Sales Tax, and Property Tax

In prior years, taxpayers who itemize were allowed to deduct the amount they pay in state and local taxes (SALT) from their federal tax returns. Slated for repeal (with the sole exception of exception of a state and local property tax deduction capped at $10,000) under both the House and Senate versions of the tax bill, SALT remained in the final tax reform bill in modified form. As such, for taxable years 2018 through 2025, the aggregate deduction for property taxes, state, local, and foreign income taxes, or sales taxes is limited to $10,000 a year ($5,000 married filing separately).

3. Educator Expense Deduction

Primary and secondary school teachers buying school supplies out-of-pocket are still able to take an above-=-the-line deduction of up to $250 for unreimbursed expenses. Expenses incurred for professional development are also eligible. This deduction was made permanent with the passage of PATH Act of 2015 and survived tax reform legislation that passed in 2017 as well.

4. Plug-In Electric Drive Vehicle Tax Credit

Also slated for elimination in the House bill (but retained in the final tax reform bill) was the tax credit for the purchase of qualified plug-in electric drive motor vehicles including passenger vehicles and light trucks. For vehicles acquired after December 31, 2009, the minimum credit is $2,500. The maximum credit allowed is limited to $7,500. The credit begins to phase out for a manufacturer's vehicles when at least 200,000 qualifying vehicles have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009).

5. Medical Expense Threshold Amounts

The House version proposed a repeal of the itemized deduction related to medical expenses but it was retained (and temporarily lowered) in the final tax reform legislation. For tax years 2017 and 2018, the threshold amount for medical expense deductions is reduced to 7.5 percent of AGI. Under the PATH Act of 2015, the medical expense deduction increased to 10% of AGI (effective for tax years 2013 to 2016).

Don't miss out!

If you're wondering whether you should be taking advantage of these and other tax credits and deductions, don't hesitate to call us to schedule a free consultation.

Who Should File a Tax Return?

Most people file a tax return because they have to, but even if you are not required to file, there are times when you should - because you might be eligible for a tax refund and not know it. The six tax tips below should help you determine whether you are one of them.

1. General Filing Rules

Whether you need to file a tax return this year depends on several factors. In most cases, the amount of your income, your filing status, and your age determine whether you must file a tax return. For example, if you are single and 28 years old you must file if your income was at least $10,400 ($20,800 if you are married filing a joint return). If you are selfLjemployed or if you are a dependent of another person, other tax rules may apply.

2. Premium Tax Credit

If you purchased coverage from the Health Insurance Marketplace in 2017 you might be eligible for the Premium Tax Credit if you chose to have advance payments of the premium tax credit sent directly to your insurer during the year. However, you must file a federal tax return and reconcile any advance payments with the allowable premium tax credit.

3. Tax Withheld or Paid

Did your employer withhold federal income tax from your pay$ Did you make estimated tax payments$ Did you overpay last year and have it applied to this year's tax? If you answered "yes" to any of these questions, you could be due a refund, but you have to file a tax return to receive the refund.

4. Earned Income Tax Credit

Did you work and earn less than $53,930 last year$ You could receive EITC as a tax refund if you qualify with or without a qualifying child. You may be eligible for up to $6,318. If you qualify, file a tax return to claim it.

5. Additional Child Tax Credit

Do you have at least one child that qualifies for the Child Tax Credit? If you don't get the full credit amount, you may qualify for the Additional Child Tax Credit and receive a refund even if you do not owe any tax.

6. American Opportunity Credit

The AOTC (up to $2,500 per eligible student) is available for four years of post-secondary education. You or your dependent must have been a student enrolled at least half-time for at least one academic period. Even if you do not owe any taxes, you still may qualify; however, you must complete Form 8863 - Education Credits and file a return to claim the credit.

If you have any questions about whether you should file a return, please contact the office.

Disclaimer
Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.