You are very philanthropic in nature and you have your old car top be donated. Well, the law is liberal too. It's not easy to understand the loopholes or the provisions that you might get in terms of donating your car. The deductions stand at the donors claimed value and the purpose of use of the vehicle.
From 2005, the rules have changed a bit. If you put the value of the carat above $5000, and then the organization sells, you can only get the gross profits on the car as the deductions. Follow these points to keep a track of your maximum deduction available. 1. Eligibility of the organization: The charitable trust must be a qualified one for the contribution to get the tax benefit.
A good place to do so is from Publication 78 which is available online and in public libraries. 2. Itemize everything: In order to avail of deductions for your car donation, you need to itemize your deductions. Those who claim standard education can't benefit from this clause. 3.
Fair market value (FMV) is to be estimated: There are various factors that must be considered in order to determine the value of your car. Many used-car buying guides will give you precise instructions so that you can make adjustments to the value of a car for accessories, mileage and other indicators of its general condition. 4.
Deduct the FMV: You are only allowed to deduct the fair market value of your car, which accurately takes into consideration the condition of the donated vehicle. You are not allowed to claim the full value of the car, as some people mistakenly believe. 5. File the Charitable Contribution Deduction: When donating your vehicle and claiming tax deduction, record keeping is essential.
You must document all the receipts and forms related to the car donation and its fair market value. Taxpayers who have any doubts about whether a contribution is deductible should call the IRS at 1-800-829-1040, or for TTY/TDD help, call 1-800-829-4059. If you are concerned that contributions are being sought for deceitful purposes, you should immediately contact the appropriate state charity official, who is often located in the state attorney general's office.
It is always better to know the rules now and then play safe rather than trying to prove our smartness. If you don't know, better ask your CPA and they will handle the job in a better way.
Find more about Tax Deductions