Saturday, October 4, 2014

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



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