What could be the first thing that comes to your mind if anybody told you that he’ll donate a car? Is it a joke perhaps or a rip off? In this day and age, doesn’t that sound like a scam? If you’re waiting for the punch line or the catch, there isn’t any. Although you can’t donate a car and not get some benefits out of it. Like any other charitable act, you will be eligible for a tax deduction when you donate car.
But seriously now, what do the charity organizations do when you donate a car? Some charities accept vehicle donations so they can use it for fund raising campaigns. Some would have the vehicle refurbished then used in a raffle event. This way it is a win – win situation. You give them a car, then they profit from it just to fund their projects. Other charities badly need vehicles, especially if they need to cut down the costs on their transportations to get supplies like medicine and other necessities. Others even have straight forward solutions to their needs by selling the used cars in an auction. Of course, the charities will use the proceeds they collect for their good intentions in helping out a community.
When you donate a car or any other vehicle, make sure that the charity you donated it to is recognized by and listed with the IRS or the Internal Revenue System. This is to make sure that you will also benefit from your donation. Otherwise, you will not be eligible to apply for some tax deductions in relation to your response to the Donate A Car campaign.
When you donate a car make sure that as you claim your tax deduction, it has been itemized in order to be credited. When filing for your tax donation, only those that were clearly itemized and provided with details will be considered. Providing the IRS with sufficient details as to how much and to whom the donation was given, supported by the charity’s acknowledgement of receipt will ensure that your application for tax deduction will not be ignored.
Another important thing to remember when you donate a car and claim it as a tax deduction is that you do not over state the value of your vehicle. Doing so will get you into trouble. You will receive a tax deduction not greater than the profit earned by the charitable organization from your vehicle. If for example your car is still worth $4000 in the market, but the charitable organization was able to sell it for only $1500, the amount of tax deduction you’ll be entitled to is $1500 only.
So if you’re contemplating on the idea, whether to donate a car for tax deduction purpose or sell the car at the normal market value it’s all a mater of your actual intentions. Donating is supposed to be an act of goodwill with the primary intention of helping others in whatever way you can and without expecting any gains or benefits in return. Whatever benefits you gain should you donate a car, is only incidental to your acts of charity and not the main objective. So if you’ll feel short changed for getting only a minimal tax deduction be more practical and less hypocritical, just sell the car instead.