You are probably looking for items you can deduct to reduce your taxable income. Since the laws on what can be claimed vary from state to state and country to country, there is a lot of confusion about what a deduction can be. In the US, the Internal Revenue Service (IRS) has many documents that can be used to determine what can and cannot be a deduction.
One aspect of tax deductions that are increasing in popularity has been car and vehicle donations. A simple process that both the donor and the charity can benefit from. A prospective donor gives a vehicle to a registered charity. That charity does one of several things with it.
- They can sell off the vehicles in running order and use the proceeds to fund their organizations.
- If the vehicle is not on running order, it may be repaired or sold as scrap.
Either way, the charity and the worthwhile causes they support benefit from the donation.
It is a simple process; however, as a donor, you have to determine a couple of things before you can legally write off any contributions made by donating your car.
First, you have to be eligible to receive the tax deduction. This can be as simple as itemizing the deductions on Schedule A of Form 1040. However, there are other limitations that you must be aware of before simply deducting the donation.
- Does the vehicle you intend to donate qualify as a tax-exempt vehicle? This is important, and there is a good chance that it will. Most legal vehicles for public roads can be used as tax-deductible donations. This also includes boats and planes, plus some all-terrain vehicles.
- The percentage you can claim. Since you can only claim up to 50% of your current gross yearly income, you are limited if you donate a vehicle, such as a plane, worth thousands or tens of thousands of dollars.
- For contributions between $250 and $500, less information is required to deduct the donation. The acknowledgment form from the charity will have to contain the following.
- o Name of the charity
- o Vehicle Description
- o Plus one of the following
- – A statement saying you never received any goods or services for your donation. Or…
- – A statement from the charity with a description and fair market value of goods or services they may have provided you. Or…
- – This must be stated if goods or services were provided in the form of non-tangible services (ex::religious advice).
- For donation amounts exceeding $500, you will need to gather additional information before deducting the donation amount. When you receive the written acknowledgment from the charity, it must contain additional information.
- o Your naNamend Tax Identification Number
- o The vehicle identification number must be present.
- o The date of the vehicle donation must be included
- o One of the following must also be included with the date of the donation
– A statement saying you never received any goods or services for your donation. Or…
– A statement from the charity with a description and fair market value of goods or services they may have provided you. Or…
– If goods or services were provided in the form of non-tangible, this must be stated.
-The charity itself must have tax-exempt status with the Federal Government. Most education and religious organizations are tax-exempt. The IRS maintains a particle list of organizations with tax-exempt status. Search the IRS website for Publication 78, Cumulative List of Organizations. This will be your best place to start for determining which charities you can donate to and receive a tax write-off.
The charity itself must have tax-exempt status with the Federal Government. Most education and religious organizations are tax-exempt. The IRS maintains a particle list of organizations with tax-exempt status. Search the IRS website for Publication 78, Cumulative List of Organizations. This will be your best place to start for determining which charities you can donate to and receive a tax write-off.
By following the guidelines provided by the IRS and the charity you choose to donate to, you can help out those organizations in need and help yourself with a tax-deductible donation. Just remember to follow the rules, and both parties involved will win.