Donate Car for Tax Credit

Benefit and Process to Donate Old Cars to Charity

How Does Tax Deduction Benefit after You Donate an Old Car in Charity?

The donation of your car can be a major contribution both in lessening the miseries of the poor along with a significant reduction in your income tax.

If you do a little planning, it will ensure maximum tax saving through your donation of car in charity. The internal income service (IRS) calculates the tax deduction proportion on the following basis;

1. In which way your charity is being used?

2. The price which the charity organization receives after your selling your donation

3. The ways to determine market value of your charity

4. Keep proper record of all necessary documents

However, in order to get maximum benefit of tax deduction, taking the following measures.

How much was the car sold for?

Use the value price of your donation the charity gets against your car after selling it. For example, if the organization sells your charity during an auction and receives $ 5,000, you can claim of your tax deduction up to a limit of $ 5,000. It does not matter, what is the market price is? You can claim for tax deduction equaling the amount – your donation has been sold during auction. In case the charity organization sells your donated vehicle to a needy person or holds it its own internal use, you can claim reduction according to the market value.

Determine the value of the car's fair market

IRS advices that during determining the value of the car's fair market, use a trusted used car guide. For instance, visit your nearest library and request for the most recent volume of Kelly Bluebook. Find private party prices of your donation based on its mark, model and the current condition. You can also take the help of internet as well.

Claiming for Tax Deduction

Report your deductible amount on line 17 of Schedule A. You can only request for tax deduction if you have itemized the aggregate amount of your lawful expenditure on Schedule A. You can also use Turbo Tax to determine your tax limit.

Additional form you need

In case the car donation amount is more than $ 500, complete Form 8283. In case your tax deduction amount remains between $ 501 and $ 5,000, you will have to fill and complete section A. On the contrary. Someone has more than $ 5,000, he will have to complete Section B. If you complete Section B, then you will also have to get a written evaluation in a document form. If you use Turbo Tax, you will have to provide the answers of a few simple questions.

Important

If the charity is $ 500 or less, then you can reduce $ 500 or the appropriate market price of your car, whichever is less. For example, if someone’s car cost is $ 650 but it is sold up to $ 350, he/she can claim for $ 500. Majority of the donation report your vehicle's sales cost on Form 1098 – C.

You must have your donation document. At least, donation documents include details of your name, vehicle identification number, your donation date and the goods and services, if you received.