How to protect yourself while trying to donating your car.

Donating used cars has become the most cost-effective way to aid a good cause and Tax deduction. But wait, you might need to know some facts before you decide to hand over your car to some charity organization. Like any other industry, the car-donation can be riddled with fraud and misleading information and you should proceed with caution.
The concept of “gifting cars” to charities with noble cause seems like a pretty good idea especially when it comes with Tax deduction. You can get rid of unwanted, used cars without getting into the hassle of finding the buyers and paying your taxes.
Many of these are not even eligible to get you Tax deduction or got a D rating from the CharityWatch because of its unfair distribution of funds to people in need. For example, a New Jersey-based charity got more than 450,000 car donations according to its website but it hasn’t disclosed where the money goes to. Some of the financial benefits go to Jewish children only, and mostly these children are from the New Jersey area.
Many of these charities mislead the public, and not enough transparent about what they do. You don’t want to donate your cars to such organizations. Do you?
If the car you are donating worth a fair amount and you plan to take a Tax deduction for it, be cautious when you proceed.
1.           Research about the charity organization you are planning to donate. If it doesn’t have a 501(c)(3) non-profit status with the IRS, it is not a charity which can get you any Tax deduction. Pick a worthy charity if you want to get Tax deduction otherwise, you can give your car to anyone. You can do a background check or simply look for reviews about the charity online. Try to stay away from the charity organizations who are not transparent about their money collection or ask for some fee for paperwork.
2.           You can get the full Tax deduction of a donated car in the case; the charity uses the car for itself, the charity donates the car to someone in desperate need of a vehicle or sells it to a needy person far less than its market value. Otherwise, your Tax deduction is limited to what charity receives from selling the car.
3.           Receipt from the charity is a piece of important evidence for the documentation regarding how much the car was sold for. Charities are required to provide you with the necessary documents within 30 days of selling the car. If your car is expensive, you need to get an independent appraisal of it as well.
4.           If you can, deliver your car to the charity itself. It ensures that only the charity organization you want to donate is getting the car, and not some intermediary middle organization.
5.           IRS form 8283 is possibly the most important form to fill-in her. If the market price of the car you are donating is more than $500, you have to provide complete information required in section A of IRS form 8283 and file it with your Tax Return.

How to get the Tax Deduction from donating a Car?

People have donated their old stuff to needy people forever. It helps you to reduce clutter and do some good for others in need. Clothes and household items have been the favorite things people like to donate. You may have also heard about car-donation. That is why you are here. Right?

Car donation isn’t a new thing but not many people know that you can collect the tax savings by donating a car to a worthy charity. There are some general rules to follow while donating to avail of this opportunity.

The first thing is to find a charity that supports a cause you would like to donate for. It could be your favorite charity organization as well. The only rule here applies is that it should be a “qualified charity” approved by the IRS and holds the Tax exemption status or be a 501C(3) organization. You can call the charity to find out their status with the IRS, as well as if they are taking the car-donations. Not every charity takes the car as a donation, and if they take, they may have some restriction about the type of car. Let’s say, you have an RV and want to donate, but there is a possibility that charity you are thinking to donate only takes cars.

To re-check the organization’s status with the IRS – get the list of exempt organizations from here. There are also some rules about how much you will get a Tax Deduction. Before 2005, it was easy to claim the car’s full fair market price as the amount of the Tax deduction. Due to this, there were many incidents of many tax filers claiming for big deductions for donated cars while charity organizations were getting far less than the amount when they used to sell the cars. So the IRS looked into the matter and changed the rules.

For most of the situations now, you can deduct only the sale price. This is the amount of the charity organization receives when they auction your car or send to a salvage yard. Most of the people don’t like this new rule. As it may take the charity from a few weeks to a few months to sell a car or they might sell it less than its fair market price. After all, it is not theirs, so why would struggle to find the right buyer for your donated car.

As per IRS rules, if the charity sells your car for $500 or less, you can claim the lesser of the fair market price or $500. Let’s say, if the charity sells your car for $200 whereas the market price for your donated car was $400, you can collect the Tax deduction for $400. In case the charity decided to keep the car for its operational use, you can also claim a Tax deduction for the fair market price of the car. You can also claim for the Tax deduction for the fair market value if the charity gives the car to someone in need. 

You can read our article here to find out the fair market value of your car.
https://donatecarsfortaxcredit.com/estimatevaluecardonation.html

 

 

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