Donating a Vehicle to Charity: How Do Car Donations’ Tax Deductions Work?
The huge tax deductions for car donations are undoubtedly one of the biggest draws that keep donors coming back. Those who don’t have a clue about this ask, “How do car donations’ tax deductions work?” Everyone wants to reduce the taxes they’re paying when the tax season comes. If everything’s done right and the IRS rules are met in a car donation transaction, trimming down the donor’s taxable income becomes a reality.
When you make a charitable contribution before the clock strikes midnight on December 31, your donation would be eligible for a tax deduction when the tax season comes in the following year. With a little bit of planning, you’ll be able to maximize the tax write-off you get out of your vehicle donation.
How Tax Deductions for Donated Vehicles Work
Thinking about donating your unwanted vehicle to charity to enjoy a thumping tax deduction? Veteran Car Donations shares a list of pointers that will help you achieve this goal. Here’s everything you need to know about vehicle donations and tax deductions
First: The charity must be 501(c)3 non-profit organization.
It’s important to know that not all charities are eligible to give their donors a tax deduction. This perk only comes from donations to IRS-certified 501(c)3 nonprofit organizations. Be sure to check the charity’s website or, better yet, check the list of the IRS’ tax-exempt organizations.
Second: Itemize your taxes.
Itemizing your taxes is the most important thing for you to do when filing for tax deductions. You must itemize your tax deduction on line 17 on Schedule A of Form 1040. Remember that your deductions shouldn’t be higher than 50 percent of your gross income.
If your tax deduction reaches $500 or more, the IRS would also need you to fill out Form 8283. Section A would be for tax deductions ranging from $501 to $5,000 while section B would be for tax deductions that exceed $5,000.
Third: Find out what your chosen charity will do with your donated vehicle.
The amount of the tax deduction you’ll receive depends on how the charity makes use of your donated vehicle. In some cases when the charity uses it for their own internal operations or sells it to a needy person at a much cheaper price, you would be able to claim a tax deduction that’s equivalent to the fair market value of your vehicle. On the other hand, if the vehicle is sold at an auction, the amount of the tax deduction you will be able to claim will be equivalent to the amount for which your vehicle was sold for.
Fouth: Provide proper documentation.
When making tax deduction claims, you need to present a written acknowledgment from the charity for documentation purposes. It should include the name of your chosen nonprofit organization, the year of the donation, and the vehicle’s make and model.
Aside from this, the tax deduction receipt should include a statement certifying that no goods and services were offered and provided to the donor for the contribution. It should also include the estimated value of goods and services provided to the donor in exchange for the donation. The receipt should also be accompanied by a statement confirming that the goods and services provided to the donor for their contribution to the charity were of religious and intangible nature.
Following these pointers will enable you to reduce your taxes.
If you haven’t figured out yet where you’re going to donate your clunker to, consider Veteran Car Donations.
Donate a Vehicle to Support Our Struggling Veterans
Donating a vehicle to Veteran Car Donations is an awesome way to give back to our former military personnel. These are the veterans who are hailed as our nation’s heroes for sacrificing and risking their lives to defend our freedoms and protect our security. Sadly, many of them are now beset with various challenges, including service-connected disabilities, physical and mental health issues, lack of jobs, and homelessness due to poverty and lack of support.
You can help ease their plight by donating your old and unwanted vehicles to us. We will sell them via auction and use the proceeds to help our IRS-certified 50(c)3 nonprofit partners in providing them with mortgage-free and specially adapted homes, free physical and mental health care services, educational scholarships, career development, employment opportunities, and many other benefits.
You can donate to Veteran Car Donations by either calling us or filling out our online donation form. We accept vehicle donations wherever you are in the United States since we have car donation programs in all 50 states.
Don’t Hesitate to Call Us
Feel free to call us at 877-594-5822 now and we’ll gladly walk you through our donation process!