How to Get Tax Breaks for Your Car Donation

A great way to support your favorite charity is through donating a used vehicle. The charity will most definitely thank you, and the government will, too. Your generosity will likely be recognized with a special tax deduction, but certain requirements must be met before you can receive this type of tax break.

Unfortunately, the policies regarding vehicle donations are not as clear-cut as those for other types of charitable contributions. The level of tax relief you can receive depends not only on the total claimed value of your donation, but also on how the charity will use the vehicle. That's why there may be a delay, and you may not know your full tax deduction amount at the time that you make the donation.

CAR DONATION

Changes were made since 2005 to the statutes for tax deductions applied to vehicles donated to charitable trusts. If the declared value of the donated vehicle exceeds 0, and the vehicle is placed for sale by the charitable trust, taxpayers are limited to claiming the gross profits from the transaction.

If this type of charitable donation appeals to you, you'll need to keep the following points in mind:

Claim Fair Market Value

When filing your tax return, be sure to deduct the fair market value of the vehicle. This amount will take into consideration the condition of the donated vehicle. Claiming the full value of the car is not acceptable.

Itemized Deductions List

You must itemize your deductions in order to take full advantage of tax relief available to you. If you are claiming standard education, you will not benefit from this clause.

Charity Eligibility

In order for you to receive the benefit, the charitable trust must qualify with the tax department. Check a copy of Publication 78, available online and at public libraries, for a list of eligible charities.

Estimating Vehicle's Fair Market Value

There are various factors to consider when determining the value of your car. Refer to a recent used car guide for precise instructions to evaluate your vehicle's value. You may need to make adjustments depending on accessories, mileage and other indicators of its general condition.

Filing Your Charitable Contribution Deduction

Be sure to keep good records when claiming a tax deduction for your vehicle donation. Store all receipts and forms relating to the car donation, and a copy of its fair market value, in a secure place. And keep it for several years.

If you are a taxpayer in the USA and you've donated a vehicle to charity, contact the IRS at 1-800-829-1040 to find out if your previous contribution is tax deductible. If you think that someone sought your contribution for deceitful purposes, speak with an appropriate state charity watchdog at the state Attorney General's office.

Donating a spare or unneeded vehicle is a very generous way to benefit your favorite registered charity. The charitable organization will thank you, and eventually so will the tax officer.

How to Get Tax Breaks for Your Car Donation

Michael Trusthold is an expert in the automotive industry, and contributes to several popular car web sites, providing tips on used cars and especially how to buy a used car cheaply and safely.

CAR DONATION