Car to donate for tax deduction
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The policy regarding the car to donate for tax deduction is not as straightforward as other charitable donations. The tax relief depends on the donor's claimed value of the donation as well as on the way the charity uses the vehicle. Thus you may not know the size of your deduction when you make your donation. In addition, as from 2005, the statutes for tax deduction for cars donated to charitable trusts have been altered. 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 who want to benefit from such a 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. A good place to do so is from Publication 78 which is available online and in public libraries.
2. Itemize the deductions for your advantage: In order to avail of 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.
Written by: the Editor
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