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Tax Deductions for Car Donations
Donating a used vehicle can be a great way to support your favorite charity. The charity will certainly thank you, and the government will, as well. Your generosity can be recognized with a special tax deduction, but certain requirements can apply when realizing this type of tax break.
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 dependent 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.
If you've made this type of donation and would like to take advantage of the tax break, keep these points in mind:
Itemize Your Deductions
To take full advantage of the deductions available for your car donation, you need to itemize your deductions. Those who claim standard education are not able to benefit from this clause.
Deduct the Fair Market Value
Deduct the fair market value of the vehicle when filing your tax return. This value is partly determined by the condition of the donated vehicle. You may not claim the full value of the vehicle.
The Estimated Fair Market Value
Various factors must be considered in determining the value of your car. Refer to a used car guide for precise instructions to find your vehicle's value. Adjustments should be made depending on accessories, mileage and other indicators of its general condition.
Charitable Organization Eligibility
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.
File the Charitable Contribution Deduction
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 are a taxpayer in the United States and you've donated a vehicle to charity, contact the IRS at 1-800-829-1040 to find out if your contribution is tax deductible. If you think that someone has sought your contribution for deceitful purposes, speak with an appropriate state charity official at the state Attorney General's office.
If you have a spare vehicle, consider donating it to your favorite registered charity. The organization, and the taxman, will thank you.
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