How Do I Determine The Value Of My Car For Tax Purposes?
Whether you are donating your vehicle to charity or whether you need to know the value of your vehicle when determining your current assets, there are ways to determine the worth of your motorized vehicle.
“Kelly Blue Book”
This is the reference that most businesses – like car dealerships – use to begin when negotiating the worth of a vehicle. Other factors such as mileage, climate and driver can also be considered when considering the value of your car. With the Kelly Blue Book website, you can answer 27 questions specific to your vehicle to help determine the true worth.
IRS Rules
If you donate your vehicle, the IRS has specific rules for determining the value of your car for tax purposes. If your vehicle could be sold for more than $500, then you can claim that amount. If the vehicle is worth less than $500, it will be up to the charity to determine the value of the ‘junk’ vehicle.
Historical Cost, Replacement Cost, or Net Realisable Value
Asset valuation can be based on any of these four methods. Historical Cost looks at what was paid and then factors in depreciation. Replacement Cost looks simply at what it would cost to replace the asset at today’s market value. Finally, Net Realisable Value looks at what would be realized at sale time. If a car requires $1000 worth of repairs before its sale, then that $1000 would be subtracted from the final sale price.
If you are applying for Medicare Supplemental Insurance or some other form of government subsidy, you may be asked to list all your vehicles and provide values. Any of the above methods can be accurate and doing your best is usually what is requested. Keeping any documents to support your figures is helpful in case the government decides to question your calculations.
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