By Levi Quinn

Donating your used vehicle to charity can be a very generous act. Worthwhile charities benefit greatly from donated vehicles either by using them directly or by selling the vehicle and using the profit for their organization. But if you’ve never donated a vehicle before, than where do you start? Here are some tips to make your donation an easy transaction.

Find the Right Charity

If you aren’t sure which charity to donate your car to then do a little research. However avoid the for-profit intermediary organizations that advertise to handle your car donation. These places tend to keep the majority of the money themselves. Some keep as much as 50 to 90 percent or even more for their pockets. Find a charitable organization that handles the donations themselves so they can keep 100 percent of the profits.

Make sure the charity is eligible to receive tax deductible contributions. Make sure they are a 501(c)(3) organization. Other organizations may claim to be a non-profit but may actually be a 501(c)(4) organization and donations to these types are generally not considered tax deductible. Ask for a copy of the organization’s IRS letter of determination which verifies its tax exempt status.

Value Your Car Correctly

The IRS has cracked down on car donations with the passage of the American Jobs Creation Act of 2004. Under this you can no longer claim fair market value for your donated car worth more than $500 but instead you must claim the amount that the charity sells your vehicle for. There are exceptions to this rule and fair market value determined by either Kelley Blue Book or NADA guide can be used when:

— Instead of selling the vehicle, the charity keeps it and uses it.

— The charity makes improvements to the vehicle before selling it.

— The car is sold at a discounted price to a person with low-income.

— The car is worth less than $500.

Other Tax Considerations

Make sure that you get a receipt from the charity for your car donation. Be aware that non-cash donations are one of the most common triggers to an audit by the IRS, so you’ll want to document the value of the car and keep records of it.

If the car is worth more than $500 you, the donor, must complete Section A of the IRS Form 8283 and attach it to your tax return. You are also required to file with your tax return a written acknowledgement from the charity. If the charity sells the car, the charity must provide you with a certification that the car was sold between unrelated parties and the sale price of the car within 30 days. In this case, your tax deduction will be limited to the total amount the charity sold the car for. If the charity does not sell the car, it must provide you with a receipt within 30 days of the sale. The charity may also be required to provide certification to you stating how it plans to use or improve the car and stating that it promises not to sell or transfer the car. Penalties are imposed on charities that provide fraudulent acknowledgements to donors.

Important Things to Remember

— Formally sign over ownership of the car to the charity. If you fail to do this any thing that happens to the car such as parking tickets or other crimes will be on your shoulders since you will legally still be the owner of the car.

— Take pictures of the car and save receipts for new tires or other upgrades to verify its value.

— Remember, it is the donor, not the charity, who is obligated to value the car and who will pay the penalties if an IRS challenge finds your figure inaccurate.

About the Author: Find the best deal on the auto insurance coverage you need. Visit us today for money-saving tips,

compare auto insurance quotes

and helpful car insurance advice.

Source:

isnare.com

Permanent Link:

isnare.com/?aid=278271&ca=Automotive