Donating a car for tax deduction
The policy regarding charitable car donations is not as straightforward as other charitable donation policies. The tax relief depends on the donor’s claimed value of the donation and the way the charity intends to use the vehicle. Thus you may not know the size of your deduction when you make your donation. In addition, the statutes for tax deduction for cars donated to charitable trusts have been altered from that of 2005. Now if the stated worth of the donated vehicle is more than $500, and if such vehicle is put up for sale by the charitable trust, then the taxpayer is limited to the gross profits from the transaction.
Taxpayers whom are interested in using the car tax deduction donation need to keep the following points in mind:
1. Verify the eligibility of the organization: The charitable trust must be a qualified one for the contribution to get the tax benefit. You can do this by viewing Publication 78, which is available online and in public libraries.
2. Itemize the deductions for your advantage: In order to avoid deductions for your car donation, you need to itemize your deductions. Those who claim standard education can’t benefit from this clause.
3. Estimate the fair market value: There are various factors that must be considered in order to determine the value of your car. Many used-car buying guides will give you precise instructions so that you can make adjustments to the value of a car for accessories, mileage and other indicators of its general condition.
4. Deduct the fair market value of the car: You are only allowed to deduct the fair market value of your car, which accurately takes into consideration the condition of the donated vehicle. You are not allowed to claim the full value of the car, as some people mistakenly believe.
5. File the Charitable Contribution Deduction: When donating your vehicle and claiming tax deduction, record keeping is essential. You must document all the receipts and forms related to the car donation and its fair market value.
Taxpayers who have any doubts about whether a contribution is deductible should call the IRS at 1-800-829-1040, or for TTY/TDD help, call 1-800-829-4059. If you are concerned that contributions are being sought for deceitful purposes, you should immediately contact the appropriate state charity official, who is often located in the state attorney general’s office.