Dan Thompson is saying goodbye to an old friend — his 12-year-old Honda Prelude.
"It's my baby, it's been with me for a long time," he says. "[It's] 140,000 miles of fun."
Thompson's donating it to the Boys & Girls Club of metro Denver, headed by CEO John Arigoni.
"We make it very simple for you, you just simply pick up the phone, call us and we have our own tow truck," says Arigoni.
The charity gets the money and Thompson gets a tax break. But because of changes in the tax law this year, financial planners say if you want to contribute your car, the time is now. If you donate your car to a charity by the end of this year, you can write off an estimate of the car's market value. If you wait until next year, you're limited to the actual price the charity gets when it sells the car. That's often a lot less.
The change comes after members of Congress complained filers are cheating the government out of tax revenues by wildly overestimating the value of their cars. They predict the stricter guidelines will bring in $2.4 billion to the government's coffers over the next ten years.
What about other year-end tax tips?
- On the job, maximize contributions to your 401(k) to reduce your taxable income.
"A lot of 401(k) plans will allow you to make extra contributions," says financial planner Ray Benton.
- If you are saving for your child's education, open a 529 college savings plan before year's end.
"Many states allow their residents to take a state income tax deduction for a contribution to that plan," says Benton.
- If you have money left in a flexible spending account for healthcare costs, pick up an extra pair of glasses or stock up on prescriptions. Most of these plans are "use it or lose it."
Experts agree you shouldn't wait until year's end to think about tax planning. It's a year-round process that can save you money.
For Dan Thompson, charitable giving and tax savings began in his own driveway.