Let the IRS Give You a Generous Present With a Tax Deductible Car Donation
Donating your car to your favorite charity lets you help the charitable cause that you really believe in supporting. It is however the car donation tax deduction that you receive from that nice tax man at the IRS that rewards you the most in your donation. As your donation will probably be the largest that you ever give to charity, for you to receive your vehicle donation tax break it is vital that you follow all the rules of the donation process. Although not complicated, you need to ensure the correct paperwork for your car donation tax deduction to stick on tax return day.
Car donation tax deduction - procedures to follow & paperwork needed for a successful donation
When it comes to donating a car for tax deduction, first and foremost you need to check that the charity you are considering is one that is IRS-approved and listed as a 501(c)(3) non-profit organization. You will find a list of eligible charities on the IRS website under publication 78. If the charitable organization that you wish to donate a car to is not listed then you would be unable to claim a car donation tax deduction and you should probably consider another charity for your tax break.
When to use vehicle fair market value for your car donation tax deduction
You can use the fair market value of your vehicle in two scenarios:
If you know that your car will have a value when sold of less than $500, or
If the charity beneficiary of your donation uses the vehicle in their day to day charitable business, rather than selling at auction, then you can use the fair market value in this situation as well. If your charity takes this option, due to tax rules that came into force several years ago, the charity concerned will have to provide you with an acknowledgement inside thirty days of your donation stating the cars intended business use. This same tax law also makes it necessary for the charity to provide you with a receipt of the proceeds within 30 days of the sale at auction of your vehicle. You can find the current tax break rules with the IRS Donors Guide to Car Donations publication under IRS Publication 4303 on the IRS website.
If you are in the position of using the fair market value of your car for your tax return, then your easiest option is to find your car value with one of the many trusted sources online like Kelley Blue Book.
If you are not in a position to donate a car to charity then keep in mind the same tax breaks apply to the donation of other vehicles as well. Motor homes, trailers, trucks, boats, snowmobiles and jet ski's, plus motorbikes often have the same tax benefits as a tax deductible car donation. However, for these vehicles it is vital to check for any tax rules that apply specifically to these other modes of transport. Your accountant should be consulted if in any doubt of the validity of your vehicles tax deductible status before you list the vehicle as an itemized tax return item.
If you simply keep these rules in mind when you donate your vehicle, then your car donation tax deduction will be assured and you will have made a big difference to your charitable organization. More importantly you will have the satisfaction of knowing you have helped someone in need, and at the same time be rewarded with a tax present from the IRS.