Donating your car to a charity is a great way to help others out. If the process is completed properly, you may be able to get a little back in the form of a tax deduction. Follow a few simple steps to make it easier when tax time comes around.
One of the first rules concerning donation set forth by the IRS is that you must donate to a qualified charity or organization. You cannot count your donation as a tax deduction if you simply give you car to someone you know. It must be an organization such as a church or charity that helps those in need. Feel free to check out the organization and find out if they’re qualified. You can determine this by calling the IRS or checking out their list of qualified organizations on their website.
A tax deduction lowers the amount of taxable income which you must pay taxes on. In order to claim a deduction for donating your car, you must plan on itemizing when you file your taxes. Itemization requires proper receipts and deductions may not exceed 50% of your adjusted gross income. If you’re using standard deductions and not itemizing, then you will not be eligible for a charitable tax deduction.
Claiming Your Donation
You can claim a deduction on any vehicle that is made for driving on roads, and also boats and airplanes. How much you can claim depends on what the charity does with the vehicle. Many charities sell donated vehicles in which case donors can claim the gross proceeds from the sale. There are some exceptions to that rule if the car is sold at a much lower market value to help out a needy family, or if the charity makes some improvements to the car, or uses it for a period of time before the sale.
In order to claim your car donation for a tax deduction, you must have written acknowledgement from the organization. This written statement must include important information about the vehicle and acknowledgement that the vehicle was donated without anything in return. The statement will also give information about the sale of the vehicle including date of the sale and gross proceeds from the sale. If any exceptions apply, the acknowledgement will have a statement containing that information also.
If you meet the qualifications for your vehicle donations, filing for your deduction should not be a problem. If your deduction amounts to more than $5,000, you may have to get a written appraisal of your vehicle. You will also have to complete form 8283, section B. Keep all documents in a safe place until it’s time to file your taxes.
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