It is possible to get a tax break if you donate your car. However, you will get a smaller tax break if you donate a very old car. Vehicle gift guidelines provide tips on how to boost your deduction amounts and finding the best car donation. You should not rely on the old tax deduction laws but rather seek to know about the latest laws.
In the past, you could have donated your old car to a charity and received a tax break of an equal amount based on its market value. That technique does not work anymore. This changed after the IRS discovered that some taxpayers were claiming more than their old cars could fetch. Consequently, the tax break depends on how much you value the gift and the purpose for which the charity will use it.
You will have it rough knowing the amount of your tax deduction when you give your car away as a gift. As it stands, the IRS has placed a $500 threshold on vehicle gifts including cars, boats and planes. Your claim for deductions will become more complicated when the value of the vehicle exceeds the threshold. On the other hand, if the charity sells the car for less than $500, you should deduct the $500 from your taxes. To get the tax deduction officially done, you must present a copy of the car's bill of sale attached to the deduction form.
If you want to ensure that finding the best car donation will bring you profitable tax deductions, you should consider the kind of charities to which you want to make the donations. The IRS provides guidelines regarding charities that are legitimate to warrant such a write off. Due to the new laws on tax deductible from vehicles donated to charities, people have changed the trend of giving donations. Some people now shy away from making vehicular donations at all. Others look for charities that will not sell the vehicles but instead use them. This has impacted negatively on the charities that relied on raising funds by selling donated vehicles.
In spite of the setbacks, charities continue to set up car donations programs. You can still find individuals and families willing to donate their cars, which could end up for sale. To some of the donors, they consider the act of giving more important than the tax deductions they may get from the donations. However, no one has ever complained about having received a tax deduction. People only complain about the amount that might not be commensurate with the value of the car.
Finding a charity that is worthy of your donation requires a great deal of research to ensure that the donation lands in safe hands. When you want to donate your old car, ensure that you are not exposed to future liabilities incurred from the donation. If the ownership of your car is not transferred when you make the donations, it could still be in your name. You would be held responsible if the new owner that bought the car from the charity is involved in an accident.
If finding the best car donation is to benefit you in any way, it should do more that make you feel altruistic. Tax deductions can be made if you provide evidence of this to the IRS. The charity should acknowledge receipt of the vehicle from you in a special form. The paper trail such as the receipt from the charity and the title change will be required to give proof of your donation. You should take every advantage of the tax breaks, as every smart person seems to do so.