Donate Car Tax Write Off

Everyone has seen and heard the commercials for donating cars to charity and getting big tax breaks at the end of the year. In the past this was true and it was very simple to figure out how much you would save on your return. You used to be able to check the Kelley Blue Book and write off the fair market value of your vehicle, no questions asked. That is no longer the case. Thanks to many people taking advantage of the system the IRS has been forced to crack down. You can't really blame them too much when you hear stories about people writing the value of a '98 Ford Escort as $20,000 on their tax returns. The new rules are much more complicated and make it so that the vehicle lender doesn't know the exact amount of their deduction when making the vehicle donation. Under the new system if your vehicle is worth less than $500 then you don't have anything to worry about, the IRS will accept this minimum amount with no questions as long as you get the correct paper work from the charitable organization you donated the car to. If your car is over $500 then things start to get complicated. The amount of your deduction over $500 is now based upon the vehicle value as well as the amount of use the charity get from it. For example if you donate a vehicle worth $2000 to the Kidney Foundation car charity and they sell it immediately for $1500 then that is your maximum tax deduction. The charity will need to inform you within 30 days of the sale and provide an acknowledgment, which you need to provide the IRS with your tax return. If, however, the charity uses the same car to shuttle patients around for 6 months before selling it for $1500, then you can claim the $2000 value on your return. This is because the charity was able to get added utility from the vehicle that was not fully reflected in the sales price. The new tax regulations do have some beneficiaries though. If you have a very low value car (under $500) you can generally claim that minimum amount on you return. For example if the charity turns around and sell the donated vehicle for $200, you can in most cases, still claim $500 when filing your taxes and have no problems. As with any charitable donation you hope to get a tax deduction for make sure you check out the charity prior to signing the car over to them. If they are not a registered as tax exempt under IRS rules your deduction will be exactly $0. Ask to see their federal tax-exempt status documentation, or call the IRS to verify the organization name at 1 800-829-1040. When filing your taxes the car donation is marked on Schedule A and form 1040. Keep in mind that the deduction is not an addition to your return, but simply a deduction of your taxable income. For example if you make $30,000 a year and donate a car that came back as valued at $2000, your taxable income for the year would be $28,000 for that year (minus any additional deductions). It is still a good idea to donate a car for a tax write off, but the days of getting massive returns are over. If you are looking to find a charity for your vehicle please visit our site about charity for cars. Article Source: http://EzineArticles.com/5033430