Donating your car to charitable organizations can be an excellent way to get a tax deduction which will be incorporated in your charitable contribution deduction and will maximize your benefits as well. The Internal Revenue Service (IRS) requires to calculate your deduction basing on how the charity uses your donation. In donating car’s you can utilize the market value.
Step 1: Find out for how much the charity sold the car for
Use the price the charity attains for your car in a sale as the amount of your deduction. For instance, suppose 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 a needy individual or reserved the car for its own internal use, then you can claim a reduction for its fair market value.
Step 2: Determine the car’s fair market value
Neither the buyer nor the seller can be an auto dealer; instead both must be private parties.
The IRS put forward, that you use a reputable used-car price guide to calculate your deduction when using fair market value.
Step 3: Claiming the deduction
When the charity aspires to make a proper use of the vehicle, for instance,to deliver meals to the needy. You should be well informed of the fact that precisely for what purpose are they putting the vehicle to use.
Step 4: Additional forms you’ll need
Complete the Form 8283 of your car donation deduction is more than $500. If your deduction is between $501 and $5,000, then you must complete Section A. But if your deduction is greater than $5,000, you must complete Section B. If you complete Section B, then you must also obtain a written appraisal as documentation.
After donating your vehicle, you need a written documentation of your donation which will include your name, vehicle identification number, the date of your donation and a statement describing the goods and services you received, if any.