Donated Cars: Car Donation and the Benefits You Get from this Practice Donate Old Car Information The practice of donating cars to charitable institutions is widely practiced in America and is very much favored by the government and its citizens. You can participate in this practice if you have a car you no longer use; you can send it to your chosen charity instead of selling it back to the market. You can still benefit from this arrangement because you are granted tax breaks for engaging in this practice. The key here is to donate the car to a charity organization recognized by the government so you can avail tax breaks provided by the law in response to act of donation. If you are new to this practice, there are also agencies which act as the middle man that will handle all the paperwork in your behalf. These agencies will help you process everything even auctioning of the car and giving the proceeds to your chosen non-profit group. Donate My Car To Charity The agency will help you get the right amount. This amount will be used as the basis for your tax deduction as mandated by the law. But you need to be careful when choosing the firm that will handle your used car. Some of these firms are unreliable because they will only give a small portion back to your chosen non-profit organization. As such you need to select who to work with. Be wary of those agencies that only give 30-50 percent of the proceeds to your chosen charity. Benefits of Donating Cars to Charity As mentioned earlier, if you donate your used car to a charity recognized by the government, you are entitled to tax considerations. The amount to be deducted would depend on what the charity does with your vehicle. For example, if the car is valued at $4,000 but the charity was able to sell it for $3,500, you are only allowed to deduct the latter in your IRS form. But if the charity decides to keep the car and use it in their operation, you can use the FMV of your car. If the car was valued at $4,000 you can use this amount as the basis of your tax deduction. Tax breaks are provided by the government to its citizens and you can also avail tax considerations through different means. One classic example is donating vehicles to charitable institutions. This is because the tax consideration is really beneficial to donors especially when they get to use a big value as tax deductible. It is also gaining popularity because the act is truly a sign of benevolence and it greatly helps charity institutions perform better in their endeavor. As such, more and more individuals are participating in this move because of the benefits it gives to one's self and to the community. Tax Considerations from Car Donations Explained The government particularly the IRS recognizes the goodwill behind donating cars. As such donors are allowed to deduct certain amount in their income tax returns. However, the IRS
laid down specific guidelines as to how a donor can claim the tax consideration. Here are the guides and their respective examples. Scenario 1 Assuming that the value of the vehicle is only $400, you can only deduct $500 in your tax return. For Vehicles sold or valued less than $500, the donor can use the maximum value which is $500. Scenario 2 If the fair market value of your vehicle to be donated is $4,500 and the charity auctioned it but only received $3,500, your deduction shall not go beyond $3,500. Scenario 3 If the fair market value of the car is $4,500 and the charity decided to use the vehicle for their operation instead of selling it, you can use the $4,500 FMV of the vehicle as tax deductible. Scenario 4 Now assuming the same elements in scenario 3 but the charity spent $2,000 for important repairs, the donor cannot use the FMV. Instead he is only allowed to deduct the difference of $2,500 in his tax return. So if the nature of your vehicle falls in any of the situations above, you need to follow the IRS guideline so you can be eligible for tax consideration. Another important thing to remember is to itemize your deductions and to ask for an acknowledgement from the charity especially if the proceeds is $500 or more. But if the information is too complicated for you, you can hand over your vehicle to donation services and they will process your intention to donate in your behalf.
Published on Apr 16, 2013