Donation of Car - Consider the Implications
When considering donation of car, you need to know what the tax implications are before you sign it away. Tax laws used to allow a person to take the fair market value of a car that they donated. However, times have changed, and the law has changed as well. Many people were taking advantage of this and claiming a higher value. Now, if you claim the car is worth more than $500, you can only claim the amount the charity actually sold the vehicle for at auction. If they sold a car worth $1500, for only $500, you can claim only the $500. If the charity decides to keep the vehicle, then the donor can take the fair market value of the car.
When considering donation of car, you need to consider the charity where you want to donate. Many charities, both local and national, accept cars as donations. The charity often has some basic requirements for the vehicles they accept. Call them or check their websites for information. Many times, they want a car that is drivable and that has no major issues such as transmission damage or significant bodywork required. Some charities do not make any distinctions with the vehicles they accept. Do your homework before picking a charity.
When considering donation of car, you need to document everything before you turn the vehicle over to anyone. The IRS often performs audits on returns that contain non-cash donations such as automobiles. To prove the tax deduction is legitimate, it is necessary to document everything. Begin with taking photographs right before you turn the car over to the charity. That will show how it looked at that time. Also, make sure you keep copies of all receipt repair receipts. The value of new tires or brakes can help boost your claim of value. Also, make sure you get a valid receipt from the charity. Without it, you cannot take the deduction.
When considering donation of car, you need to follow through at the end of the year. Just about, the only thing the charity will not handle is filing your tax return. They will give you the receipt you need to file for the deduction. You need to claim the deduction or give the paperwork to your tax filer. After you file the return, put the receipt and other documentation with your return copy. If the IRS ever audits you, you will be prepared.
