Donate Autos - IRS Provide Strict Rules for Tax Donations
When you choose to donate autos, you need to be aware of the tax implications. Many people donate under the assumption they will get a substantial tax write-off in the process. However, the IRS has rules in place that you must meet before you qualify for a tax deduction. The first consideration is the amount of the deduction you can take. If the car is worth less than $500, you can take the amount off your tax bill. If the amount is over $500, you need to provide a copy of the charity's receipt to the IRS. It needs to show that they received the vehicle in question.
The next consideration when you donate autos is what happened to the vehicle after you donated it. If the charity sold the car, they should send you an updated receipt showing the sale amount. That is the maximum amount you can take as a deduction on your taxes. If the charity kept the vehicle for their own use, they need to indicate that fact in the updated receipt. If the charity makes significant improvement to the vehicle after they receive it, they must note that fact on the receipt. In either of the latter cases, you can take the fair market value of the vehicle instead of the amount of the sale. If the fair market value of the car is higher than $5000, you will need a formal appraisal before you take the tax deduction.
When donating autos, to claim the tax deduction, you must itemize the deductions on your return. Most people itemize if they have deductions that will be higher than the standard deduction. If the standard deduction is higher than the itemized, you will lose the benefit of the tax deduction for the donated car. It is best to understand this prior to making the donation so you don't get a bad surprise at tax time. If you have any questions, consult the IRS or speak with an accountant. They can help you walk through the process.
If you donate autos to the wrong organization, you will lose the ability to take the tax deduction. Qualified charities register as charities under the 501 (c) 3 provisions. If you have any question about whether a charity is legitimate, you can ask for their tax-exemption number and check it with the IRS. Donate to organizations that you can verify. Without proof, you lose the tax benefit of your donation.
