Irs and car donation
IRS And Car Donation
Car donation is a noble cause since by donating your vehicle you are helping a family in need. Though this is one of the reasons why people think of donating their car, perhaps the most important reason is tax benefit. When you donate your car to a charity, you can actually claim the amount as your deduction. There is more that one should know about the IRS (and car donation. IRS has established certain rules which one needs to qualify to be able to donate the car and claim deduction. Some of these rules are given below –
IRS Rules for Car Donation
• Identification: The IRS recognizes vehicle donations to only those organizations and charities that are considered qualified. Some government affiliated agencies, churches, synagogues, temples, mosques, etc, are also considered to be qualified recipients. The IRS website can guide you on which charities are qualified and where to locate them. You can also contact your state charity officials whenever in doubt. Another important thing that one should keep in mind is that the car that you are planning to donate should be itemized in your annual return if you want to claim tax deduction.
• Size: As per IRS, the gross proceeds of the car can only be deducted if the charity or the non profit organization that you donated the car to has sold it off and that also at a value less than $500. The charity is responsible to send you documents stating the sale price of your vehicle within 30 days of the date of sale.
• Exceptions: There are two exceptions as per IRS rules that allow you to calculate your tax deduction by using the fair market value. However, the charity is required to send the relevant documents well within 30 days. These two exceptions are –
o If the charity keeps the vehicles for its own use.
o If the charity makes substantial improvements/repairs.
• Documentation Requirements: Every tax deduction needs to be properly documented in order to be allowable. In most cases, the receipt sent by the charity suffices the requirement of the IRS car donations. But if your car donation falls under the rules that require you to use the fair market value then you will need to calculate. The IRS Publications 526 (Charitable Deductions) and 561 (Determining the Value of Donated Property) can guide you on how to go about it.
It is important for you to have a proper understanding of these rules if you want to donate your car to charity. A little research while looking for the right charity can save you from last minute surprises. In any doubt or confusion, one can seek help from experts or can visit the IRS website.