World News – Donating your car to charity can result in significant tax savings if included in your charitable contribution deduction. However, do a little planning will ensure that maximize tax savings of your donation. The Internal Revenue Service (IRS) requires calculating your deduction in one of two ways, depending on how the charity uses your gift. Deductions for charity sells cars are limited to the selling price. In all other cases, you can use the fair market value of the car.
Using the price of charity gets for your vehicle in a sale as the amount of your deduction. For example, if the charity sells the car at auction for $ 3,000, your deduction is limited to $ 3,000, even if the fair market value is $ 4,500. However, if the charity sells the car at a discount to an individual in need or keeps the car for its internal use, then you can claim a deduction for their reasonable market value.
Step 2: Determine the Fair Market Value of the Car
The IRS suggests that you use a used car price guide reputable to calculate your deduction when the fair market value is used. For example, go to the local library and get a recent copy of Kelley Blue Book. Search private party prices based on your vehicle make, model and overall condition. This type of search can be performed via the Internet as well.
Step 3: Claiming the Deduction
Report the amount of your deduction on line 17 of Schedule A. Because you can only claim a deduction for donating your car if you itemise, the total of all your eligible expenses on Schedule A must exceed the standard deduction amount for your state civil.
Step 4: Additional Forms you Need to Complete Car Donation for Tax Credit
Form 8283 if your deduction car donation is more than $ 500. If your deduction is between $ 501 and $ 5,000, must complete Section A. If your deduction is more than $ 5,000, you must complete section B. If the B section is completed, you must also obtain a written evaluation and documentation.
Tips For Donating Car for Tax Credit
- If the charity sells your car sells for $ 500 or less, you can deduct $ 500 or the market value of your car, whichever is less. For example, if your car is worth $ 650 but sells for $ 350, you can deduct $ 500.
- Most charities will report the selling price of your car so that on Form 1098-C.
Warnings When Donating Car for Tax Credit
- You must have documentation of your donation. At a minimum, the documentation received from the charity must include your name, vehicle identification number, the date of grant and a statement describing the goods and services received, if any.
Published in Costa Rica, on the Costa Rican Times
Donate Car For Tax Credit