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[D597]Donating A Car To Charity

by Chris Roberts, Chr

Car charities accept all kinds of motorized vehicles: trucks, vans, RVs, boats, trailers, planes and motorcycles. Many charities claim they can't meet the demand for good used cars. So, these car charities need your help. Most car charities fund their programs by selling donated vehicles at auctions.

If you qualify, the tax deduction can also come in handy at the end of the year. To qualify you must be able to itemize your deductions on your tax return. Check with your accountant to see if you qualify. Make sure you get a receipt from the car charity. The receipt will include three things: the car's value, the charity's name and donation date. The receipt is essential, especially in the case of an IRS or state audit.

Unfortunately, you can't just take the Kelly Blue Book value for the car anymore. You have to wait until the charity sells your car. Then you can only deduct up to the amount of the sale. If you're just in it for the good feeling, the tax deduction is just a bonus anyway. But, not everyone can deduct their donated car. You have to be able to itemize your deductions.

Again, the amount of deduction is the value of the car up to $500 or the amount for which the car is sold, if above $500. So how is the value of your donated car determined? You can deduct the full market price if your chosen car charity uses the vehicle for its own purposes: deliveries, pickups, or passenger transportation. That means that under the new tax regulations you can only deduct the fair market value of the car if the charitable organization uses the car in direct connection with their car charity. You can find the fair market value for your vehicle in the official Kelly Blue Book.

Did you remember the car's title? Don't forget it! You'll need it at the time of donation. Some car charities can work around it, but many need the title in order to accept your donation. So as you're driving your car to the charity, remember these three items: the title, the keys, and the paperwork.

See it's simple. Giving your car to charity will save you time, headaches, maybe even give you a tax deduction. If you've been on the fence about donating your car, get off the fence and give a deserving charity a call.

Starting in 2005, if the claimed value of your donated car exceeds $500 and the item is sold by the charitable organization, your tax deduction is limited to the amount of money the charitable organization actually receives from selling the vehicle.

The charitable organization must provide you (the donor) with a written acknowledgement within thirty days of the sale, specifically stating the net amount they received for selling your donated car.

As an example, let's say you make a car donation to a non-profit charity, and the fair market value of that car is $5,000. The charity then sells the car without "significant use" or "material improvement", for a total sale price of $2,500. Your deduction is limited to $2,500, not the $5,000 fair market value.

This is substantially different than earlier years when you could deduct the entire estimated fair market value instead of the amount that the car donation actually raised for the charity.

Another caveat is that many non-profit organizations use a third-party administrative service to handle the pick-up and auction sale or your car donation. The resulting administrative fees are often 20% or more of what the car sells for at auction.

Your tax deduction is correspondingly lowered by the amount of third-party fees because the net amount the charity receives has been reduced. In the example above, your car donation deduction would be reduced from $2,500 to $2,000.

There are a few exceptions to these car donation tax deduction rules of thumb that are recognized by the IRS.

Car Donations: "Significant Use" & "Material Improvements"

If the charity significantly uses or materially improves the vehicle, they must certify that in the form of an acknowledgement to the donor (within 30 days of the contribution). In the case of significant use or material improvement, the donor may usually deduct the vehicle's market value ($4,000 in the example above).

To be considered "significant use", an organization must use the vehicle to substantially further its regularly conducted activities. The recipient organization's use of the vehicle:

1 - Must not be insignificant
2 - Must not be intended at the time of the donation

Significance also depends on the frequency and duration of use by the non-profit organization.

"Material improvement" includes major repairs or other improvements that significantly increase the vehicle's value.

Cleaning the vehicle, minor repairs, and routine maintenance are not material improvements.

Make sure you don't get misled by a car donation sales pitch saying you can claim higher tax deductions than the IRS allows.

For more information, see IRS Publication 561, Determining the Value of Donated Property ( PDF 101K) at www.irs.gov

Article Source : Cars For Sale Florida

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Both Chris Roberts & Greg Reynolds are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

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