If you want to support a charity but feel like your finances would not permit you, you can explore other donation options. One of these many donation options is transferring the ownership of your car to your chosen charity. Without shelling out cash, you can send help where it is most needed.
There are different reputable car donation charities out there. Most of these organizations also partner with another foundation or cause-oriented group. In those charities that partner with other foundations, the former takes care of finding willing donors, with the latter taking care of lining up or pairing donations with genuine, screened recipients. This symbiotic relationship allows the faster gathering of donors and quicker dissemination of help. At the end of the day, it is the beneficiary of the donation that benefits the most.
As a donor, you may not think much about how you can benefit from your donation, both the government and the charitable institution you are working with believes that generous individuals like you need to be rewarded. So, what exactly can you benefit from your car donation? Getting a tax write-off is one of the main reasons for car donations. But, how exactly does this mechanism work, and how can you have your tax written off?
What is tax write-off?
In 2004, the rules applicable to the car donation tax write-off was changed. Along these changes are complex processes set in place. Nevertheless, it is possible to get a deduction that is almost equivalent to your car’s fair market value. The moment you donate a car that is valued more than $500 and the receiving charity sells the same; you need to secure a written notice from the selling charity that the said car was “sold in arm’s length transaction” between unrelated parties. Aside from that, the written notice must also include the gross proceeds of the car sale.
If the sold vehicle is sold through the charity’s programs, you also need to get a written certification stating its planned usage time and its intended use. The charity should not exchange or sell the same vehicle before the stated ‘planned usage time.’ If your car is valued over $5,000, you need to secure an independent appraisal stating the said car value.
If your car’s value is valued at more than $500, you also need to file an IRS form called Form 8283. The said form needs to be attached to your tax return. However, if your car is worth over $5,000, aside from Form 8283, you need to include the charity-issued independent appraisal in your tax return.
How can you claim the tax deduction?
After finding out the value of your car donation to reputable car donation charities, you need to report your tax-deductible amount on Schedule A of the IRS form. Take note that you can only claim a deduction if you itemize your car donation. This means that you need to break down your eligible expenses when you input in on Schedule A. The same expenses must be more than the predetermined deduction amount for your tax filing status.
You need to secure documentation of your car donation. At the very least, the said documentation from the charity should include your name, your vehicle ID number, date of donation, and full disclosure of all the services and goods you received.
Filing for a tax deduction on your car donation is easy. The reputable car donation charities you decide to work with will help you complete this documentation. So, what are you waiting for? Donate today and enjoy the perks of your goodwill.