Before getting too excited about having the tow truck haul your pile of scrap away, you’d better arm yourself with knowledge which will help you navigate through the taxation benefits involved.
Many used vehicle owners assume they can donate car for tax credit purposes and receive fair market value for their charitable contribution. That may have held truth in 2005, however the Internal Revenue Service has tweaked the requirements to avoid losing millions of dollars on egregious claims. To help navigate you through some of the requirements that both charities and donators must meet, you should understand it all boils down to what your car is actually worth.
FMV and your gift
Receiving an accurate tax credit first requires proper itemization of Federal tax returns. Using IRS form 1040EZ is no longer allowable when claiming charitable deductions, meaning you’ll need to use regular 1040 tax forms moving forward. Depending on the amount your car is appraised for, using this form may actually reduce your tax liability. Since the standardized deductions for single taxpayers is $5260, you get to take the amount of your vehicle off your reported income before using the deduction. Donate car for tax credit benefits goes beyond this for charities themselves.
Some nonprofit organizations may qualify to receive your donation, however that doesn’t necessarily mean you’ll qualify to receive the credit. Either the Internal Revenue Service or Chamber of Commerce can help you identify whether the organization you intend to give your car to qualifies you for the tax credit. To expedite the process, simply ask the organization has been granted exempt status by the IRS.
In order to receive the maximum allowable tax credit, one of four conditions must exist: the organization must sell the vehicle for greater than $500, your vehicle donation must be used to commission critical services such as delivering meals to handicapped individuals, the nonprofit organization must sell the vehicle to an individual in need of transportation at or below market value, or the charity must make significant physical improvements to the motor or body. If the donated vehicle sells below $500, or none of the above conditions exist, a tax credit can be earned at a prorated amount.
Common places to donate car for tax credit
As you probably assume, you can always drag, push or pull your clunker to Catholic Charities, Salvation Army, Goodwill or the American Red Cross. These organizations have been approved by the Internal Revenue Service as a 501(c) (3) compliant, and other places where you can usually get the maximum tax write off for donations. If you personally deal with local organizations that aren’t nationally renowned, and you wish to take your vehicle to them in hopes of bettering someone’s life, check with your local branch of the IRS to make sure mandatory minimum tax requirements are met. You can even read how to donate a car in California for deeper insight, too.
There are times of scams where people will call and get you to donate car for tax credit purposes, yet have other intentions in mind – mainly selling your car and making a hefty profit. Know ahead of time that nonprofit organizations will not call pandering donations of your vehicle, so avoiding this phone scam should be relatively easy for you to accomplish.
You can, in fact, donate car for tax credit reasons provided you know all the laws of taxation ahead of time. Cheating the IRS will not prove helpful since everything is digitized and will eventually catch up with you. It takes little time to find out where you can safely, and beneficially, donate car for tax credit purposes.