Car Donation Tax Deduction Guide
What Car Donation Tax Deduction Will You Achieve When You Donate Your Car?
Besides the pleasurable aspect of donating your old car to a worthy cause, you need to ensure you abide by the IRS regualtions if you intend to aquire the car donation tax deduction. When it comes to understanding and calculating your car donation tax deduction, the main point to be aware of is:
What will the charity do with your car when you donate it?
Before you make a final decision as to which charity will recieve your donated car, ask if it is to be retained by the charity to use as transportation for people in need or for the general transportation purposes of their cause. If that is the case, or, if they intend to give the car to a family in unfortunate circumstances, you will be entitled to deduct the ‘fair market value’ of your vehicle for car donation tax deduction purposes.
For car donation tax deduction purposes…
‘fair market value’ could be regarded as the Blue Book ‘private sale value’. If however, the charity intends to sell the car to the public or at auction, the car donation tax deduction is the gross proceeds attained at the sale. In this instance, you may have considered your car to be worth $4,000, but if it is sold at auction for $3,000, your tax deductable amount is $3,000.00
The exception to the above is…
Cars that have a specified ‘fair market value’ on the receipt from the charity of over $500.00, that sell for lower than $500.00
You car was classified on the receipt from the charity as having a ‘fair market value’ of $750.00 but it sold at auction for only $350.00. According to the iRS car donation tax deduction rules, you can record your donation as $500.00 on your tax returns.
To get a Car Donation Tax Deduction – Who should you contact?
If you do not have a specific charitable cause in mind for your car donation, you can ask any charity pick-up service or agency that collects on behalf of various charities exactly what will happen to your vehicle and what they endevour to do to achieve the best price at sale. There are many such agents on the web, and they usually say on their website that they cover all US States for charity car collection.
Many charities and agents state they will do their best to get close to Blue Book private sale price, which will effect how much you can claim on your tax returns.
To read more on donated car tax deduction, the Internal Revenue Service provides guidelines on their website, along with the latest information on regulations. See the IRS website
Car Donation Tax Deduction – What is Your Tax Bracket?
If you are unsure about the donate car tax deduction benefits you could achieve, contact your tax preparer or CPA for advice. As a guide; if you know your tax bracket and know you are in a taxable position when you complete your returns for the year end, you can apply the following calculations to get an idea of your possible deduction.
Multiply the value of your vehicle by your tax bracket. So, if your donated car was sold by the charity and they inform you of the gross proceeds raised; you multiply that by your tax bracket.
For example: $2,000 by 0.28 equals a $560.00 deduction
As you can see, when you have cars to donate, it is worth the effort as the charity will welcome the boost to their fund raising, and you get the car donation tax deduction… so everyone wins!
Filed under Donated Cars Tax Deduction .