Donating your old vehicle is a great way to give to one of your preferred charities. Your generosity will also result in a special tax deduction provided by the government, but keep in mind there are certain requirements that must be met to get these tax breaks.
Unfortunately, the government’s policies regarding vehicle donations are not as clearly laid out as with other types of contributions to charities. The amount of tax relief you receive depends not only on the value of your donation, but also on the way the charity itself chooses to use or dispose of the vehicle.
Thus, you may not learn what your full tax deduction will be at the time that you actually donate your car. In 2005 there were changes to the statutes for tax deduction for vehicles donated to charities. If the stated value of the donated vehicle is claimed to be more than $500, and if the car or truck is put up for sale by the charitable trust, then you are limited to the gross profits from the transaction. So you may want to be careful in donating a rare car.
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Here are some points to keep in mind if you want to make a charitable donation of your vehicle:
When claiming a tax deduction for your vehicle donation, it is important to keep good records. Be sure to keep and record all forms and receipts related to the truck or car donation, and its claimed fair market value.
Verify the Eligibility of the Charity
The charitable trust must qualify with the government’s tax department in order for you to receive a tax benefit. One good place to find a complete list of recognized charities is Publication 78, available online and in most public libraries.
Estimate the Current Fair Market Value
Various factors must be taken into account when determining the value of your car. Refer to a used car guide for instructions to find your vehicle’s value. Adjustments should be made for things such as accessories, mileage, and other indicators of the vehicle’s general condition.
Deduct the Car’s Fair Market Value
When making your charitable donation claim, deduct the fair market value of the vehicle. This amount takes into account the condition of the donated vehicle. You may not claim the full retail value of the car.
Itemize All of Your Deductions
To take best advantage of the deductions available for your truck or car donation, you need to itemize your deductions. Keep careful records from the start, and things will go smoother if questions arise later.
If you’ve already donated a car and want to know if your contribution is tax deductible, phone the IRS at 1-800-829-1040. If you are concerned that contributions have been encouraged for deceitful purposes, contact your state charity official, most often located in the state Attorney General’s office.
If you have a used vehicle you no longer use enough to justify owning, consider donating it to your preferred registered charity. The organization, and the tax official, will both thank you.
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Filed under: Sell My Car