A check made out to the qualified charitable organization with a receipt from them is the cleanest way to ensure your charitable tax deduction is the amount donated.
Giving away an automobile to a charity was once straightforward. You could claim the old car's fair market value, that is, the amount a willing buyer would pay a willing seller for the product. Typically, you'd refer to auto valuation services, such as the Kelley Blue Book, to get an idea of the donated car's value, give it to your favorite nonprofit and then drive off with a tax break equal to that valuation amount. No more.
Because some taxpayers got greedy, claiming much more than their old autos were worth; lawmakers tightened the rules on how much you can write off for a vehicle donation. Now the precise tax break depends on the donor's claimed value of the gift and how the charity uses the vehicle.
In most instances, a taxpayer must take into account a $500 threshold on vehicular gifts. This value amount applies to autos, boats and even airplanes. When the donated vehicle's value (based on credible fair market value analyses) exceeds that amount, claiming the deduction gets more complicated.
This valuation ceiling comes into play when a charity sells a donated vehicle. In this case, just how much a taxpayer can deduct depends on the amount the sale nets.
For example, you donate your old station wagon that's worth $1,000. Under the old rules, that would be the amount you could deduct. But now, if the charity turns around and sells your donation for $800, your deduction is limited to the lower sales price.
The charity must give you substantiation of the Internal Revenue Service-allowed donation amount within 30 days of when you turn your car over to the charity or, if the group sells the auto, within 30 days of the vehicle's sale.
By now, you should have gotten word from the charity as to what it did with your old vehicle. If you haven't heard from the charity, give it a call and ask that it send, or resend, you the donation specifics.
Plus, you now must include a copy of the acknowledgment with your tax return. Previously, such receipts were generally only kept by the taxpayer in case the IRS questioned a claimed deduction.
Say you donated your $1,000 automobile. Instead of immediately selling it, the group used the auto for several. Eventually, the organization decided to sell the vehicle for $800. In this case, you could still claim the full $1,000 fair market value of the auto as long as you received documentation from the food bank on not only the sales price, but also how the auto was used for nonprofit works before the sale.
Under the IRS regulations, this is classified as "significant intervening use" of the vehicle that allows the taxpayer to claim the higher deduction.
Read more: Donating A Vehicle To Charity | Bankrate.com http://www.bankrate.com/finance/money-guides/donating-a-vehicle-to-charity-1.aspx#ixzz1szG4fTaU
hide
