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Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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I became totally and permanently disabled after a working for 44 years. I returned to college late in life (while working full-time) to fulfill my dream of becoming an RN and at that time found it necessary to secure student loans. Three years after being declared totally and permanently disabled my student loans were discharged. In January 2013 we received a 1099-C form declaring said student loans that were discharged however that amount could be considered as income for 2012. This was a large amount of money and we live on two pensions and social security income.

I started looking on the internet for information regarding 1099-C and felt that this was something that we could not handle alone. I made phone calls locally to a very reputable tax group in a city near us and they said it would cost $500 for an appointment and that they really prefer to do corporate taxes and they referred me to a local person who had worked for them at one time, we called and explained the situation and an appointment was made and then the comment was made that "I will have to do some research on this" and flags immediately went up and we called back and cancelled that appointment. I had been researching the IRSwebsite and every place else I could think of and I was not comfortable doing our own taxes this year. We called another local tax preparer that we had used in the past and made an appointment, however prior to the appointment, while still seeking information regarding our situation,

I came across a website for Gary l. Bode, MSA, CPA, PC in Wilmington, NC. I called Mr. Bodeand explained our situation and asked if he could help. He spoke very knowledgeably regarding the situation and stated that yes; he felt he could help us. As Mr. Bode was in North Carolina and we were in New York I scanned all of our documents including back-up documents for all of our claims and forwarded all to him. Mr. Bode kept in touch with us via email; we have spoken on the telephone several times and have become very comfortable with his knowledge and professionalism. Also, as I am a true "worrier" I have continued looking into information regarding our tax situation and I came upon another web page for Mr. Bode that included testimonials which spoke of his experience with this type of tax situation as it became prevalent during the recession. This reinforced in our minds that we had made the right decision in hiring this person as our tax preparer.

I share all of this as our taxes are now ready to be filed (we do owe tax for 2012 but not the astronomical figure we thought we were facing), and we are confident that they have been prepared with the utmost care by a gentleman who has an excellent working knowledge of the situation we faced and the tax laws that were applicable to said situation.

 

Bill and Carol

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Giving your Car to Charity?| tax CPA discusses Form 1098-C |Schedule A Car Gift tax examples

tax implications of giving your care to charity

Gary Bode, CPA: here's the tax perspective on donating your car the charity. (910) 399-2705.

Tax CPAs saw more Form 1098-C (s), Contributions of Motor Vehicles, Boats and Airplanes, during the past two tax seasons. Let’s look at a personal contribution of a car to a charitable organization, a Church for example . This post doesn’t cover business donations of a car.

The technique of giving your un-wanted vehicle to charity often makes headlines, usually touting the tax benefits of these transactions. Giving your car to charity is great, but don’t expect a large tax impact. You generally lose money donating a car to charity. Here are the details to help you decide between selling your car or giving it away.

“IRS tax deductions are seldom what they seem. The explanations and examples below outline the common scenarios when gifting a car to your Church.” 
– Gary Bode, tax CPA

You can only Deduct Half the Car’s Value

Your tax CPA uses the gift of a car as a non-cash charitable contribution on line 17 of Schedule A, Itemized Deductions, which attaches to Form 1040. Here the first cut is the deepest; only 50% of the car’s value is potentially deductible in the Gifts to Charity section.

The Total amount of Schedule A deductions must exceed the Standard Deduction

Schedule A is a typical IRS form. There are seven sections, all with their own rules. Medical cost is a good example; there’s the infamous 7.5% of Adjusted Gross Income floor limiting the deduction. The total of all seven sections of Schedule A must exceed the Standard Deduction to get any tax impact.

Differences in Valuation of the Car

The car’s donation value is the Fair Market Value. But your Church is not in the used car business. So they probably use a third-party to sell your car. If so the value of your gift is limited to the sales price, less 50% per Schedule A. You avoid this limitation if the Church (as an example) sells your car itself or gives it to a needy parishioner. If you’re claiming a value over $5000, the IRS requires a qualified appraisal.

Documentation

The Church has to acknowledge your Gift to Charity within 30 days. Usually that’s on Form 1098-C, which it sends to you and the IRS. A recent tax court case makes the 30 day rule a deal breaker. I also suggest taking pictures of the car and keeping the sales receipts to prove you owned the car. Why? In an audit, the IRS Agent will want to see proof.

Tax Savings are less than Tax Deductions

Your actual tax savings is worth your marginal tax rate times the value of half the car – see below. Many folks think a tax deduction equals the tax savings amount. If you have less tax due than the tax savings from the gift, you get no tax impact below $0 tax liability – see below.

Bad Tax Examples of Donating CarsYou give your car to a friend down on his luck. No tax deduction is available; your friend is not a charitable organization.

  • You donate a car worth less than double your Standard Deduction. And say you have no other itemized deductions. You get no tax relief since you get the Standard Deduction anyway.
  • You donate your car and don’t keep the proper paperwork. If audited you get no tax deduction, plus penalties. Ouch.
  • You have $100 of tax due before the gift of the car. The car donation saves you a potential $300 in tax. You lose the other $200 (300-200) in the current tax year but you can carry that forward to future tax years.

Best Tax Scenario car’s Fair Market Value is $10,000

I understand charitable giving isn’t just about tax savings. But here’s the IRS perspective.

  • You donate a $10,000 car as a Gift to Charity.
  • The Church provides required IRS documentation.
  • Your other itemized deductions already exceed the standard deduction.
  • You have enough tax due, before the car donation, to benefit from the tax savings of the car donation. Let’s say $3,500 of tax due in 2013.
  • Now there’s a $5,000 tax deduction on Schedule A (10,000 FMV x 50%) from donating your car.
  • Your Itemized Deduction on page two of Form 1040 increases by $5,000.
  • Therefore your taxable income decreases by $5,000.
  • Your tax rate is 30%.
  • You save $1500 in taxes ($5,000 X 30%).
  • Your final tax bill is now $2,000 (3,500-1,500).
  • You could have sold the car for $10,000. You lost $8500 (10,000 – 1,500)by donating it to the Church.

I’m a tax CPA with a virtual office to provide you services wherever you live. (910) 399-2705.

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