Looking For A Good Tax Break Donate Your Car To Charity

Looking For A Good Tax Break Donate Your Car To Charity



Looking For a​ Good Tax Break? Donate Your Car to​ Charity
Alright,​ that old rattletrap,​ rusting buggy still masquerading as​ a​ car has been taking up space in​ your driveway for much too long .​
It’s become part of​ the​ neighborhood landscape .​
You’ve been able to​ overlook it,​ but your neighbors are growing a​ little upset .​
You’ve bitten the​ bullet and realize the​ time has come to​ get rid of​ it,​ but how?
Why not contact a​ charity to​ see if​ they are interested taking the​ car as​ a​ donation? Not only is​ giving your car away to​ a​ charity good for deposit in​ your karma bank,​ when tax time rolls around,​ that donation can help keep some of​ your cold hard cash in​ the​ bank as​ well by allowing you​ to​ take a​ potentially sizable deduction .​
If you​ ask around,​ you’ll find numerous charities that have established programs for taking vehicles as​ donations.
As you​ might expect with the​ IRS,​ there are some tricky rules .​
Giving a​ car away to​ charity for a​ tax break is​ not as​ easy as​ it​ used to​ be .​
The old tax laws allowed you​ to​ write off the​ fair market value of​ any car given to​ charity .​
Fair market value was determined by auto industry standard evaluation services,​ like the​ Kelly Blue Book,​ so if​ the​ Blue Book value of​ your car was $2,​000,​ you​ got to​ write that whole amount off when tax time arrived .​
That system was fraught with abuse,​ however,​ with people claiming inflated donation values of​ $654 million in​ one year alone .​
Therefore,​ the​ law changed in​ 2018,​ and the​ IRS now places some limitations on​ the​ way donation deductions are claimed.
The basic rule is​ that IRS places a​ cap on​ vehicle donation deductions of​ $500 .​
If your donation is​ worth more than that,​ then you​ will be required to​ meet a​ few criteria before you​ can claim your deduction .​
First,​ you​ need to​ know how the​ charity is​ using your car .​
If they take if​ from you​ and sell it,​ then the​ price they sell it​ for is​ the​ amount you​ can claim as​ a​ deduction,​ even if​ it​ is​ less than the​ value of​ the​ car .​
If the​ charity sells your car for more than it​ is​ worth,​ you​ can only claim a​ deduction up to​ the​ fair market value of​ the​ vehicle.
There are a​ few exceptions .​
If the​ charity decides to​ give the​ car away to​ a​ needy person,​ or​ if​ they sell the​ car to​ a​ needy person for far below the​ fair market value,​ then in​ most cases you​ can claim the​ actual worth of​ your car as​ your deduction .​
Also,​ under the​ Intervening Use Exception,​ if​ the​ charity uses your car for awhile before selling it,​ and then sells it​ for below the​ fair market value,​ you​ can claim the​ value of​ your car at​ the​ time of​ the​ donation as​ your deduction,​ since their use of​ the​ car lowered the​ value.
However,​ if​ the​ charity makes improvements to​ the​ car,​ increasing its value,​ and later sells it​ for more than it​ was worth when you​ donated it,​ you​ can still only claim the​ fair market value of​ the​ vehicle at​ the​ time of​ donation .​
Whichever circumstance applies to​ you,​ the​ charity should notify you​ in​ writing within 30 days of​ receipt of​ the​ car of​ their intentions for the​ car and the​ donation value .​
If they sell the​ car,​ they must notify you​ within 30 days in​ writing of​ the​ sale price.
Of course,​ deductions are not subtracted directly from your tax bill,​ but rather allow you​ to​ reduce your tax bill by a​ percentage .​
Exactly how much a​ deduction will take off your tax bill depends on​ your income,​ your tax bracket and how you​ file.




You Might Also Like:




No comments:

Powered by Blogger.