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Showing posts with label car donation. Show all posts
Showing posts with label car donation. Show all posts

Tuesday 15 July 2014

New Rules for Donating your Car to Charity

Summary:
In prior years, if you wanted to donate your car or other vehicle to a charity, it was easy.  All it took was to select the charity, give them a call and they would pick it up and the ownership documentation.  This part is still easy and many charities advertise how easy this part is for you.  If you want to claim a tax deduction for that car donation however, the tax rules have changed a little.

Article Body:
In prior years, if you wanted to donate your car or other vehicle to a charity, it was easy.  All it took was to select the charity, give them a call and they would pick it up and the ownership documentation.  This part is still easy and many charities advertise how easy this part is for you.

If you want to claim a tax deduction for that car donation however, the tax rules have changed a little.  The reason for the changes were because people were over-estimating the value of vehicles then taking the higher amount off on their income taxes.

First, to even qualify for this tax deduction, you need to be itemizing deductions on your income tax.  This effectively eliminates everyone using a 1040 short form, or 1040EZ or those who don't itemize.  Further charitable deduction cannot be greater than 50% of your total income.  I don't quite understand why this matters to the government but it's in the rules.  Further, the amount you can deduct for the contribution depends on what the charity does with vehicle donations.  Check the IRS resource publication 4303 at www.irs.gov for more information and details.  Now is a good time to state that I am not a tax attorney, accountant or make my living working with the tax code.  For more specific information on donating you car to charity or other related questions, I suggest contacting a local tax professional.

A 500 dollar deduction is the threshold for increased paperwork requirements.  If however your charitable gift is worth over the 500 dollar limit, you need acknowledgement documentation from the charity.  This is typically given to you when they pick up the vehicle.  This document must have the following information for you to claim any amount over the 500 dollar basic deduction.

1.  Your name and Taxpayer ID [usually your social security number]
2.  The vehicle Identification numbers
3.  Date of contribution
4.  An any one of these pieces of information.  a) statement that no goods or services were received for the gift. OR b) a description and good faith estimate of anything received by the donor.

There are a few other details that should be included but this is the basic outline required.

The IRS also limits the value of the deduction to what the charity actually received from selling the vehicle.  Generally however, you can use fair market value if certain rules are followed and you obtain a statement made by the charity regarding their plans for the vehicle. You may also be required to obtain written acknowledgement from the charity within 30 days from the date of the vehicles sale or 30 days from the date of donation.

So the value of the deduction is based on what the charity actually sold the vehicle for on the open market.  Other rules apply if they decide to keep it but generally most charities of any size take their donated cars and simply sell them on the market.  This means that if you donate your car to charity and it has a resale value of 5,000 dollars, you simply cannot legally take a 5,000 dollar deduction unless the charity actually sells the car for that amount, or is subject to the other rules.

If the charity sells your car for 400 dollars, even though it was worth 5,000, your legal deduction is only 400 dollars.

Finally, to make things even more complicated, the value of the vehicle cannot be more than the fair market value.  The IRS publication noted above has specific explanations about how to determine value.  I personally have simply sold the car and made a cash donation to he charity of my choice.  Yes, it takes a little longer but I didn't need to count on anyone else to provide the necessary documentation and there was no question about the value of the donation or deduction.


Charity car donation – steps to take

Summary:
If you would like to help people who are less fortunate than you and you don’t know which are the possibilities to do so, or if you intend to buy a new can and don’t know yet what to do with your old one, then car donation might be the perfect solution.

Article Body:
You can donate your car to a wide range of charity organizations, but picking the most representative ones requires getting some previous information. So before actually donating your car, make sure you get some relevant info about the charity organization, its purposes, projects and usage of your car. You might find out that there are various organizations that have different goals and you will probably find, among them, a great cause and possibility to donate your car to something meaningful. Even more, make sure that your car is going to go to an eligible organization that is serious in its acts and has valid previous work. In order to be sure, speaking directly with the charity agents is the safest way to go. In fact, the IRS requests that the donors are aware of the type of the fundraiser society they choose. When talking to the charity representatives, the most important information regards the exact usage of your car, if it will be sold, fixed up, offered to the less fortunate people and so on. Besides

Charitable donations and car evaluations

Another important thing before donating your car is evaluating it in a correct way. There are various guides on the market that offer elaborate instructions, in order to establish the valid value of your car, depending on its general condition, accessories, age and mileage. After making sure that you selected the correct charitable organization and the optimum evaluation, you should be aware of the fact that you are required to complete and attach an IRS form to your tax return, in case you are claiming a car donation that values 500 $ or above. Donating a used car to charity is a great solution if you are planning to purchase a new car or if you are simply willing to contribute to a charitable activity. Knowing and following some steps before the actual car donation avoids further worries, as it makes the process a safe and fulfilling one.

Are there any hidden facts about used car donation that I should be aware of?

First of all, not every used car donation programs are functioning legally. Before you make your used car donation, you should check with the IRS if the charity is a non-profit organization listed under paragraph 501 (c) (3) in the IRS Publication 78.
Secondly, check out if the used car donation program is run in-house by the charity itself or by a third party. If a third party is operating the used car donation program, you should ask what percent of the profit made by selling the donated cars actually goes to the charity. Often, third-party operated used car donation programs produce small amounts of money for the charity. Smaller charities do not afford the costs of transportation and storage for the donated cars, not to mention the costs involved in charity auctions. This is the main reason why charities accept to have their used car donation programs run buy third-party brokers.