Tis the season to be thinking about;

Donations and Deductions!

I donated a car to the National Kidney Foundation in December, 2000. They gave me a form (Form # 8283) and some instructions. The instructions are very confusing and hard to understand. They deal more with stocks, paintings, and other things other than an automobile. The blue book trade-in on the car is $1,100, loan is at $1,000, and the retail is $2,225. I gave $2,100 for it in Oct. of 1995 and put more than $1,500 in it for repairs in the last two years. How do I figure this into my taxes? S.W., (question received via e-mail)

There are no specific rules available for valuing a car donated to charity because every situation is different. Each car has a different value based on its make, age, and condition. Instead, the IRS recommends that you use the Blue Book value as a starting point, then make a determination as to the actual value of the car based on how much you could actually sell the car for on the open market.  

If you've cared for the car and kept it in like-new condition, it may be worth more than the Blue Book value. If this is the case, you should be able to provide documentation of repairs and upkeep, as well as a picture of the car and maybe even an independent appraisal from a car dealer.  

Other good evidence of the car's value can be obtained by clipping classified ads for cars of the same type and condition. Make sure the date is on the ads that you clip so that you will be able to document the value of the car at the exact time you donated it.  

If the car has deteriorated in value, so that it is not worth even the amount shown in the Blue Book, the IRS expects you to take that into consideration when you assign a value.  

Use your judgment and be honest about what you think someone would actually be willing to pay for the car.  

The amount you deduct will appear on your Schedule A as a charitable contribution. You must be able to itemize deductions to claim this expense.  

Can an individual deduct wage garnishment from his/her taxes, if so what is the proper form to use? J.W., (question received via e-mail )  

Think of the garnishment as wages that you received and then paid out. If you were making the actual payment yourself and the payment was for something that is tax deductible, you would be entitled to a deduction on your tax return.  

For example, if your wage garnishment is to pay alimony, you are allowed to take a tax deduction for alimony, so you can report this amount on page one of your tax return as a deduction.  

Or, if the wage garnishment is going toward unpaid state income taxes, you can take the tax portion of the garnishment (but not the related interest and penalties) as an itemized deduction of state income taxes.  

If the garnished amount is for a non-deductible cause, such as unpaid federal taxes or child support, you are not entitled to a deduction.  

You've written about the deductions allowable for health premiums for the self-employed. What about rules regarding deducting healthcare expenses for employees who are on group plans?  I heard that if health expenses reach a certain percentage of your annual income, you can deduct. E.F., (message received via e-mail)  

You are correct. If the medical expenses you pay, including the cost of health insurance, exceed 7.5% of your adjusted gross income (AGI), and if you are otherwise entitled to itemize your deductions, you can deduct those health care expenses that exceed 7.5% of your AGI.  

The expenses you can deduct are those not covered by your group plan. In other words, you can only deduct amounts you pay yourself.