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- 10 Must Know Car Donation Tips for Maximum Tax Deduction
10 Must Know Car Donation Tips for Maximum Tax Deduction
- By Rebeca Walsh
- Published 29 September 2008
- Taxation
- Unrated
You always look for some best charity car donation tips before donating your car, truck, van or any other vehicle. By following the below mentioned tips you can get good tax deduction by donating your cars, trucks, boats, airplanes, ATVs and even old motor homes.
- At the very first point, it is important for you to know that there were some changes made in the motor donation law in the year 2004. Now you get a donation rebate depending upon the amount for which the selected charity ends up selling the car.
- If your want to find out if the charity is eligible to receive the tax deductible contributions make sure you ask for the "Letter of Determination" issued to the organization by Internal Revenue Services.
- Always insist the charity organization to issue you a well documented receipt for your vehicle donation.
- The IRS carefully examines the non-cash donations, so make sure you carefully mention the vehicle value and accurate records.
- If the estimated value of your car is $5,000 or above, then you are required to get an independent appraisal and complete all the parts of Internal Revenue Service form. The number of your Internal Revenue Service form may change from time to time. Therefore, it is must that you fill all the portions properly and attach your income tax return with it. A written acknowledgement from the charity must be included.
- If the charity organization sells the donated car, then it mustprovide the donator with sales price of the vehicle and the certification that the vehicle was sold between parties not related to each other. All this paper work should be sent within 30 days of the sale. If the trust does not sell the car, then the donor is provided with a receipt. The donor will also be provided with a certificate that the vehicle will not be sold or transferred to any other party.
- For determining the current market value of vehicles that are worth under $5,000, you should either refer to Kelley Blue Book or a guide from NADA. Give correct details of date, mileage and condition of the car. It is not advisable to pick the highest figure for your vehicle year and model as IRS will briefly examine each detail.
- Take close-up pictures of vehicle inside and out to keep a record. You must keep all the receipts pf any upgrades done including the purchase of new tyres. Verify the value of the vehicle at your end as well.
- If IRS audits or challenges your mentioned figures, then it is not the charitable organization that will pay the penalties. It will be the actual owner of the vehicle who will be blamed for submitting wrong figures.
- There are some charities that use the donated vehicle for transportation or hauling and thus get benefited directly from the donation. But in maximum cases, the vehicle is sold by charity, dealer or car donation center to raise funds for charitable organizations. Therefore, it is always recommended that the donator should check with the charity how they are planning to handle the donation.