Cars - Donation: Donate Your Car
To donate your car to charity is not that complex. However, you
need to be alert of the new tax policy before you donate your car to a
non-profit association. The IRS provides some general set of laws of thumb on
car donations:
Starting in 2005, if the claimed value of your donated car goes
over $500 and the item is sold by the helpful organization, your tax deduction
is limited to the amount of money the charitable organization actually receives
from selling the vehicle.
To donate your car, the charitable organization must provide you (the donor)
with a written acknowledgement in thirty days of the deal, particularly stating
the net amount they received for promoting your donated car.
As an example, let's say you donate your car to a non-profit association, and
the reasonable market value of that car is $5,000. The association then sells
the car without "significant use" or "material upgrading",
for a total sale price of $2,500. Your conclusion is limited to $2,500, not the
$5,000 reasonable market value.
This is considerably unlike earlier years when you could abstract
the entire expected fair market value instead of the amount that the car
donation really raised for the aid organization.
Another caveat is that many non-profit organizations use a
third-party managerial service to handle the pick-up and auction sale or your
car donation. The resulting administrative fees are often 20% or more of what
the car sells for at auction.
Your tax deduction is in the same way lowered by the amount of
third-party fees because the net amount the charity receives has been reduced.
In the example above, your car donation assumption would be condensed from
$2,500 to $2,000.
There are a few exceptions to these car donation tax assumption
rules of thumb that are familiar with the IRS.
Car Donations: "important Use" and "matter Improvements"
If the charity extensively uses or substantially improves the vehicle, they
must verify that in the form of an acknowledgement to the contributor (within
30 days of the role). In the case of significant use or material improvement,
the contributor may usually withhold the vehicle's market value ($4,000 in the
example above).
To be measured "significant use", an organization must
use the vehicle to largely further its regularly conducted actions. The receiver
organization's use of the vehicle:
1 - Must not be insignificant
2 - Must not be proposed at the time of the donation
Significance also depends on the frequency and duration of use by
the non-profit organization.
"Material improvement" includes main repairs or other
improvements that significantly enlarge the vehicle's value. Clearing out the
vehicle, trivial repairs, and routine maintenance are not material
improvements.
Make sure you don't get misled by a car donation sales pitch
saying you can claim higher tax deductions than the IRS allows.
Finally I hope that you will donate your car reasonably.
You will find on this blog more articles on how to donate your car