A Tax Credit for a Vehicle Donation
Donating a car to charity’s often one of the easiest ways to get it out of your driveway. While your donation won’t net you a tax credit – a dollar-for-dollar reduction on your tax bill – it may net you a deduction, which reduces your taxable income. To get a deduction for a vehicle donation, you’ll need to forgo the standard deduction and itemize your deductions – which may not be worth it if you don’t have enough deductions. You’ll also need to follow the IRS’s rules about the donation.
Qualifying Charity
If you want to claim a donation, you’ll need to be sure the organization to which you give your car qualifies as a charity under IRS rules. Many third-party auto brokers handle vehicle donations for charities, which complicate your donation: If the broker provides a portion of the vehicle’s sales value to the charities, you’ll only be able to claim that amount. If they operate under a flat-fee basis, in which they keep all sales proceeds and provide the charity a payment to use its name, you may not be able to claim the donation at all. If you donate directly to an organization, it must be a qualifying 501(c)(3) charity. The IRS’ Select Check Tool allows you to determine if an organization qualifies to receive tax-deductible charitable donations.
Value of Deduction if Sold by Charity
You may claim up to $500 in value for your donated vehicle without any additional confirmation from the charity. If you want to deduct more than that, you can’t claim the vehicle’s fair market value as determined by Kelley Blue Book or a similar price database if the charity sells it to raise funds. Instead, you may only claim the amount for which the charity sold it. If the charity sells the vehicle drastically below the market value, you may still claim up to the $500 valuation limit, according to Bankrate.com.
Value of Deduction if Used by Charity
If you donate a vehicle to a charity and it uses it in as an asset – for example, if a meals-on-wheels program uses your old car to deliver meals – you may claim the fair market value of the vehicle as your deduction amount using Kelley Blue Book or a similar valuation database. This value may be claimed even if the charity uses the car, then eventually sells it for less than fair market value.
Confirmation of Sale or Receipt
The charity must provide you with a written receipt 30 days after it receives the vehicle if it intends to use it in its operations, or 30 days after it sells it. Even if you valued the donation at $500 or less, you must receive a receipt in order to claim the deduction. If the car is sold, the amount of proceeds the charity received on the sale is reported on your receipt, which is the value of your deduction.
articel source : https://finance.zacks.com/tax-credit-vehicle-donation-4011.html
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