Most people assume that donating a car to charity is something only the rich use to reduce their tax burden. Anyone can file a tax return with itemized deductions if they take the time and effort required to do so. You will be responsible for keeping any receipts to substantiate your deduction claims, donating a car to charity is now easier than ever.
Charity organizations have relied on donated items for may years, although this is not the main source of the overall donation revenues. In a report issued by the General Accounting Office in 2003, charities were not bothered much by car donations. The average charity held as little as six per cent in intake was due to car donation.
The self-employed are in an especially good position to take itemized deductions of monies turned back into the business as well as legitimate car donations. A charity that is sanctioned by the IRS and has a legitimate non- profit tax ID number should be more than able to provide you with the forms you need to make your deduction with the same confidence as any other type of deduction you save a receipt for.
It is not unusual for a taxpayer to decrease their tax bill by up to forty per cent by taking the time and effort to keep accurate records.
Donating a car to charity is a viable method of reducing your taxes by using the value of the donation to put you into a lower tax bracket. As the amount of the tax savings can be substantial, there tends to be a flurry of car donations to charities as the end of the tax year gets closer.
As a rule of thumb, the sale value will be nowhere near the value it is listed as having in the Kelley Blue Book. This is due to the charity selling the car onto the wholesale or scrap markets. The IRS requires you to keep a receipt showing exactly how much the charity was able to get for the car, if the amount is over $250.
It is always a good idea to talk to a CPA, especially if you already have the services of one retained for your regular tax preparation advice. If you own a business, this is especially true. Even the same car donation to charity can vary greatly in its value to an individual’s return.