Credit For Your Kindness: Car Donations
Friday, December 21st, 2007Looking for a way to support your favorite charity? That used car in your driveway could be a big help to the group, and you might end up with a little money in your pocket. Generous donations of this type are recognized with special tax deductions, but certain requirements can apply.
There are policies regarding vehicle donations that may not be as straightforward as with other charitable contributions. The amount of tax relief you can receive is dependant on the value of your donation, and how the charity intends to use the vehicle. You may not even be aware of your full tax deduction amount at the time that your donation is made.
Since 2005, changes have been made to the statutes for tax deductions applied to vehicles donated to charitable trusts. If the declared value of the donated vehicle exceeds $500, and the vehicle is placed for sale by the charitable trust, the taxpayer is limited to claiming the gross profits from the transaction.
Taxpayers wishing to benefit from such a charitable donation need to keep the following points in mind:
Itemized Deductions
You must itemize your deductions in order to take full advantage of tax relief available to you. If you are claiming standard education, you will not benefit from this clause.
Claiming Fair Market Value
When filing your tax return, be sure to deduct the fair market value of the vehicle. This amount will take into consideration the condition of the donated vehicle. Claiming the full value of the car is not acceptable.
Estimate the Fair Market Value
When determining the value of your car, there are various factors to consider. You can use an up-to-date used car guide for fairly precise instructions to evaluate your vehicle’s value. Some adjustments may be needed to reflect the accessories, mileage and other indicators of the general condition of the vehicle.
Check Your Charitable
The charitable trust must qualify with the tax department in order for you to receive a tax benefit. A good place to find a complete list of recognized charities on with Publication 78, available online and in public libraries.
Filing Your Charitable Contribution
When claiming a tax deduction for your vehicle donation, it is essential to keep good records. Be sure to keep and record all receipts and forms related to the car donation, and its fair market value.
If you’ve donated a vehicle in the USA and want to know if your contribution is tax deductible, contact the IRS at 1-800-829-1040. If you are concerned that contributions have been sought for deceitful purposes, contact the appropriate state charity official, located in the state Attorney General’s office.
Donating a spare vehicle is a very generous way to benefit your favorite registered charity. The organization will thank you, and the taxman will, too.