Tax benefits of donating a car to charity: An Overview

by Wilson Rock SEO If you donate a car to charity in the hope of getting tax deductions, the first thing to keep in mind is that only IRS approved charitable organizations can afford you this privilege. So, to begin with, you need to make sure to call a car donation agency that works only with IRS approved charity partners (specified under section 501(c). You are allowed tax deduction for donating a car under the car donation laws in effect from 1st January, 2005.

The following are some provisions of these laws:

• Treatment of low value cars: If the value of car that you wish to donate is low (i.e. less than $500), you can claim its fair market value without additional paperwork. A receipt provided at the time of car pick-up is enough to validate the claim.

• Cars valued higher than $500: If the valuation of your car exceeds $500, tax deduction is restricted to the price at which it is sold. All proceeds from the sale of your car go to your preferred local charity. After the sale of the vehicle, a trustworthy agency does not take more than 30 days to provide you with a receipt. When selling, they try to get maximum value for your used vehicle too.

• Cars in good running condition: If your car is in a good running condition, make sure your car donation agency verifies a good market value for the same. The car donation agency might make use of the car for a local charity, or improve the vehicle’s condition before sale. In either case, they offer you a receipt that specifies the higher value of your car, i.e. its fair market valuation. This helps you claim a size able tax deduction for your donated vehicle.

How much does the charity receive?

Before donating to charity, all agencies keep a portion of amount they receive after the sale of donated cars. They deduct under two heads – percentage of the amount realized after sale, and fees. This is where the car donors need to be careful. Some donation agencies claim to offer a lot higher percentage of sale proceeds to the agency, but deduct a higher tax.

If $60 is deducted as fee for a donated car sold for $100, a 70% offering to charity means that it receives only $28. However, if only $30 is deducted as fee while 50% is offered to charity, it receives $35. So, make sure you are aware of all the terms and conditions before trusting a car donation agency.

Sponsor Ads

• Ad Space Available - Rent it Now!

Created on Dec 31st 1969 18:00. Viewed 0 times.

Comments