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Vehicle Donation Tax Deduction Definition

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Best Charity Car Donation Tax Deduction Tips
IRS provides room for car donation tax deduction, by which you can avail a tax benefit by donating your car or vehicle. If you are planning to avail this benefit and wondering how to go about it, here are some good car donation tax deduction tips.
Ensure that the charity or non-profit organization is qualified:
? If you donate to a non-qualified organization, you cannot avail car donation tax deduction for your donation.
? The Publication 78 in the IRS website consists of a comprehensive list of most organizations that are qualified to receive tax deductible donations. It is better to collect the correct details of the organization’s name and if possible its headquarter location before checking the details in IRS website.
? You can also ask the organization for their IRS’s “Letter of determination” that will confirm their status.
? Please note that certain organizations such as churches, mosques, temples and government organizations are not required to register and hence they might not be found in the list. However, they still might be qualified. You could check with your state charity officials or attorney general’s office to verify the details.
Ensure that you have all documents intact:
? Obtain a receipt from the person picking up the car or vehicle. The receipt should contain information such as all significant details of the donor, description of the donated car or vehicle, name and tax ID number of the organization that is going to receive your donation proceeds.
? If the gross proceeds are more than $500, ensure that you receive a supplemental receipt that contains details such as actual sale price, your Social security number and all other information that is required for your car donation tax deduction.
? Take a photocopy of all relevant documents before and during title transfer for your records.
? Take lots of close-up photographs of both the inside and outside of the car or vehicle that you are going to donate and save them along with the other records.
Ensure that you transfer the title properly:
? Proper transfer of ownership is mandated for a car donation tax deduction. For title transfer, you need to first fill out a donation form.
? Provide details such as Vehicle identification number (VIN) and also details on any mechanical problems or damage for the car or vehicle that is to be donated.
? Fill out and complete title transfer formalities before any representative from the organization takes away your car or vehicle.
? It is advisable to inform the Department of motor vehicles and get the registration details updated.
Ensure proper tax filing:
? The final step is to file an itemized tax return. If you do not itemize, you cannot benefit from the car donation tax deduction.
Car Donation Tax Deduction Information And IRS Resources
Donating a car has more to it than charity – it means that you are about to take your first step towards availing a car donation tax deduction for the financial year that is taxable to you. In most cases, it could be simple; however, the tax payer’s situation determines how effectively the deduction can be utilized.
How does car donation tax deduction work?
Donating a car or any other vehicle to a charitable or non-profit organization is tax deductible as donating any other item of value. It should create a tax deduction equivalent to its commercial value. However, the actual effect of this donation on your tax is based on the following factors namely:
- The tax bracket that you belong to
- The value of the donated car or vehicle
The tax bracket that you belong to depends on your total taxable income for the financial year. However, irrespective of your tax bracket, your car donation tax deduction is definitely going to cause an impact on your total tax payable.
The value of the donated car or vehicle is derived from the gross proceeds raised from the sale of the donated car or vehicle. Some important things to be considered while donating your car or vehicle for availing car donation tax deduction are:
- Ensure that you donate your car or vehicle to a qualified organization or charity. As per IRS definition, qualified organizations or charities include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals.
- Ensure that you receive a donation receipt containing all relevant donor information, description of the donated vehicle, name and tax ID number of the organization receiving your donation proceeds. This receipt will serve as your official tax receipt if the gross proceed for your car or vehicle is less tha $500. If it is more than $500, you should receive a supplemental receipt containing the actual sale price, your Social security number and all other information that is required for your car donation tax deduction.
- Another most important and last step towards the car donation tax deducting is to file an itemized tax return. These details should be listed on Schedule A of Form 1040. In case the total deduction claimed is greater than $500, Form 8283 must also be filled completely and enclosed along with it.
The following IRS resources could be useful in guiding you to avail your car donation tax deduction: