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Save Money on Your Taxes and Make Room In the Garage at the Same Tme

If you are considering making a charitable donation of your car and the tax deduction is important there are a few important things you should do first. Check out the charity and make sure they are legitimate. Check the value of your vehicle through an appraiser or using an online tool like Kelly Blue Book, kbb.com or Edmunds.com. Understand your responsibilities as a donor, the IRS publication 4303 provides guidelines.

A common misconception is that everyone that donates a vehicle to charity gets a tax benefit and the reality is often quite different. You can only take charitable deductions if you itemize your deductions using Schedule A. So if you plan on filing a 1040 EZ there is no tax advantage to donating a car.

If you are itemizing and are making a donation there are limits that apply to how much you may deduct. Charitable contribution deductions cannot exceed 50% of your adjusted gross income. Gross income is your total income including interest and dividends less certain items like IRA contributions and student loan interest. When you or your accountant completes your return it will be calculated as part of the process.

Figuring out how much you can deduct boils down to is the vehicle being donated a qualified vehicle. The IRS defines a qualified vehicle as; “any motor vehicle manufactured primarily for use on public streets, roads, and highways; a boat; or an airplane. However, a vehicle held by you primarily for sale to customers, such as inventory of a vehicle dealer, is not a qualified vehicle.”

As a rule the amount you can deduct depends on what the charity does with the donated vehicle. This is usually listed in the documentation provided to you by the charity when you make your contribution. Usually, charities sell your vehicle, which means that the amount of your donation is not what you believe your vehicle to be worth but rather what the charity ultimately sells it for.

There are exceptions to the rule (Gross Proceeds Limit) however. If the charity plans to use the vehicle before or in lieu of selling it, they plan to make improvements to the vehicle before selling it, for example a new paint job and tires or they plan to gift or sell it below market value for a charitable purpose. Each of these exceptions require documentation prior to your donation of the vehicle, so be sure to check IRS regs. before signing anything over.

Selecting the right charity for your donation is the final step to assuring you deduction. Not all charities are created equal and not all entities that say they are charities are charities. The most common type of “Qualified Organization” is a 501(c)(3), for example religious or educational groups. The IRS website has a page that allows you to research your potential beneficiary IRS.gov.

Not all qualified organizations may be listed here, churches, synagogues, temples and mosques are not required to apply for IRS recognition of exemption and are often times not listed. If your charity or religious organization is not listed you can contact IRS Customer Account Services at 877-829-5500. When calling make sure you have the charity’s correct name and address.

Finally always keep accurate records for your all of your donations, including signed stamped, dated donation receipts that are complete, your written appraisal from a qualified appraiser if your deduction is over $5,000. If your contribution is between $500 and $5,000 you must complete Section A of IRS form 8283 and attach it to your return.



Source by Frank P Addessi

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