How To Turn Your Old Beat-Up
Car Into A Car Donation Tax Deduction
How To Turn Your Old Beat-Up
Car Into A Car Donation Tax Deduction
If you're thinking about donating a
car to a charity you may want to keep the following tips in
mind. A car donation tax deduction can benefit not only you
and the charity but a person in need also.
Charities have the option of using
donated vehicles for their own use, for providing
transportation for volunteers or for charity-related
activities such as picking up supplies etc. But more often
they will already have enough vehicles and they will sell
the auto, truck, RV, airplane or other vehicle from their
car lot or through dealers to raise funds for their
charity. If the
charity uses a dealer they've contracted with, the charity
may only receive $50 or less from the dealer when the
vehicle is sold.
Changes in the laws limit the amount
the donor can receive for a used car donation to the actual
price that the charity sells the car or truck
for.
If the charity or car donation program
is not familiar to you, you may want to make sure the
charity is eligible from the IRS to receive tax deductible
contributions.
Request a copy of the charity's letter of determination from
the IRS. This letter verifies the charity's tax exempt
status.
Make sure that the charity or car
donation center gives you an itemized detailed receipt for
your car donation. Keep it in a safe place and file it with
your tax return. Non-cash donations can be
an unwanted red flag for an IRS audit so make sure you
document the value of the car and keep good detailed
records.
If you discover that your old used car
is worth more than $500 then you as the donor must fill out
Section A of the IRS Form 8283 and file it with your income
tax return. Make sure you get a written acknowledgement
along with the receipt from the charity because you'll be
required to do so.
If the charity turns around and sells
the car instead of using it for transportation then the
charity must give the donor certification that the car was
sold at what is called "arms length" between parties who are
unrelated. And
after the sale report the sale price of the car to you
within at least 30 days. The donor's car
donation tax deduction will be only for the amount that the
charity sold your car for. And if the charity doesn't sell
the car and elects to keep it, then it must give you, the
donor, a written receipt for the vehicle within 30 days of
the date of the sale.
The charitable car donation
organization might also be required to provide certification
to the donor showing how it plans to make use of or improve
or repair the car or other vehicle and also that it promises
it won't sell or transfer the car to another person or
company.
In the US, the federal government
imposes penalties on charities that provide fraudulent
acknowledgements or documentation to donors.
If the car, truck or vehicle you plan
to donate is worth $5,000 or more, then an independent
appraisal is required and you must fill out Section B of IRS
Form 8283. You ma have to get advice from your CPA or
accountant on how to handle this.
If you think or know your car or truck
or other vehicle is worth less than $5,000, you can use the
Kelley Blue Book or a little guide book from the National
Auto Dealers Association (NADA) to figure out the market
value. You can find these guides online or at your local
public library. You must use the correct figures for the
mileage, date and exact condition of your car - document
this as much as possible. Choosing the highest figure listed
in the guide for your car model and year without taking into
consideration any of the other options and factors will not
make the IRS very happy.
Take several current pictures of the
car or truck and save all your vehicle receipts for new
tires, repair work, or any necessary upgrades to help prove
its value.
It's important to remember, that you
as the donor, not the charitable organization, are
responsible for determining the value the
car. It is
you who will pay any penalties if the IRS challenges your
figures through an audit.
There are many reputable lesser-known
as well as the more well-known charities such as Target,
Purple Heart, Kidney Foundation, Salvation Army and Goodwill
Industries. Centers are located in every state including
Massachusetts, California, Minnesota, New York, New Jersey,
Michigan, Illinois, Connecticut etc. Some of the charities
in some states seem more active in pursuing the donations
than others and you'll find more ads.
These are just a few of the best tips
you should know about if you plan on donating a car, truck,
RV, airplane, boat or other vehicle. Armed with these facts
you can start to make an educated decision about whether you
want to go ahead and donate a vehicle and get a nice car
donation tax deduction.
copyright©2008 Helen Hecker All
rights reserved. No permission is given to copy or reproduce
this article in any way or in any form.
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