Donating Your Car To Charity
Donating a car to charity is not that difficult. However, you need to be aware of the new tax regulations before you donate your car to a non-profit organization. The IRS provides some general rules of thumb on car donations:
Starting in 2005, if the claimed value of your donated car exceeds $500 and the item is sold by the charitable organization, your tax deduction is limited to the amount of money the charitable organization actually receives from selling the vehicle.
The charitable organization must provide you (the donor) with a written acknowledgement within thirty days of the sale, specifically stating the net amount they received for selling your donated car.
As an example, let's say you make a car donation to a non-profit charity, and the fair market value of that car is $5,000. The charity then sells the car without "significant use" or "material improvement", for a total sale price of $2,500. Your deduction is limited to $2,500, not the $5,000 fair market value.
This is substantially different than earlier years when you could deduct the entire estimated fair market value instead of the amount that the car donation actually raised for the charity.
Another caveat is that many non-profit organizations use a third-party administrative service to handle the pick-up and auction sale or your car donation. The resulting administrative fees are often 20% or more of what the car sells for at auction.
Your tax deduction is correspondingly lowered by the amount of third-party fees because the net amount the charity receives has been reduced. In the example above, your car donation deduction would be reduced from $2,500 to $2,000.
There are a few exceptions to these car donation tax deduction rules of thumb that are recognized by the IRS.
Car Donations: "Significant Use" & "Material Improvements"
If the charity significantly uses or materially improves the vehicle, they must certify that in the form of an acknowledgement to the donor (within 30 days of the contribution). In the case of significant use or material improvement, the donor may usually deduct the vehicle's market value ($4,000 in the example above).
To be considered "significant use", an organization must use the vehicle to substantially further its regularly conducted activities. The recipient organization's use of the vehicle:
1 - Must not be insignificant
2 - Must not be intended at the time of the donation
Significance also depends on the frequency and duration of use by the non-profit organization.
"Material improvement" includes major repairs or other improvements that significantly increase the vehicle's value. Cleaning the vehicle, minor repairs, and routine maintenance are not material improvements.
Make sure you don't get misled by a car donation sales pitch saying you can claim higher tax deductions than the IRS allows.
For more information, see IRS Publication 561, Determining the Value of Donated Property ( PDF 101K) at www.irs.gov
Greg Reynolds writes about fundraisers and fundraising events for schools, churches, and nonprofit organizations. Signup for the free monthly newsletter at www.fundraiserhelp.com and get free samples from top suppliers.
Article Source: http://www.ArticleGeek.com - Free Website Content
More Resources
Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exiting
More Taxes Information:
Related Articles
Fraudulent Tax Shelters - KMPG Goes Down Hard
In the largest criminal tax case ever filed, KMPG has copped a plea to using fraudulent tax shelters to bilk the government out of 2.5 billion dollars.
Hurricane Katrina - How To Use Your Business Loss To Get A Refund on 2004 Taxes
With the massive losses caused by Katrina, the economy of the Gulf Coast region is in extremely bad shape. Fortunately, there is a quirk in the tax code that can help you generate a large refund from your 2004 taxes.
Another Tax Loophole
Just image, you are a small manufacturing company, business has been good, but yesterday you received a call from a customer who wants 50,000 widgets in 45 days. The customer is a large account and if you turn the business down, he may never call you again.
What Are The Irs Payment (Form 2290) Options And What Is Stamped Schedule 1?
When E-Filing with ExpressTruckTax you have 3 IRS Payment options for paying Form 2290 HVUT or any tax amounts due. The options are Electronic Funds Withdrawal (EFW), Electronic Federal Tax Payment System (EFTPS) or by mailing in a check or money order.
Artificial Tax Avoidance Scheme Closed By HMRC
200 People Who Used a PwC ‘Artificial' Tax Avoidance Scheme Now Face Paying Back Tax in Full, Plus Fees for Using the Scheme.
4 Important Things That A Cpa Firm Can Do For Your Business
Do you know what can a CPA firm do for your business? If no, this article can give you a brief on the services that the firm can provide you.
Cancellation of Debt and Your Income Tax Return
Many people get in over their heads with credit card and other debt and sometimes after years of trying creditors forgive the debt and take the tax deduction that comes along with the loss but one company's loss may be your taxable gain.
Why Do Most Businesses Choose Corporate Tax Advisors?
As most businesses get more stressful at the time of filing their taxes, they look for dutiful and responsible corporate tax advisors to get their tax return done by them.
Homeowner Tax Deductions for Mortgage Interest and Property Taxes
Is the interest on my mortgage deductible and what about my property taxes? During tax season these are two of the most common questions we get asked and the answer to both is yes. As long as you understand the rules that apply to what qualifies as mortgage interest and what are property taxes.
Trucking Tax – Notify of change of address to IRS
You have seen remarkable business profits, setting up a new business location and shifting things there for better prospects. The reasons may be anything to make a move. But, to make sure this doesn't affect your tax communications from the IRS or any refunds that should reach you, you ought to notify them about your new business address. There are many ways you can go about doing this.
It's a Taxing Time of Year
Yes, that's right, it's that time of year nobody loves - tax time! No, this is not too early to think about it, especially if you have money coming to you.
Hybrid Vehicles and Tax Benefits
You have to love car dealers. With the passage of the Energy Policy Act of 2005, car dealers are screaming about the tax benefits of buying these vehicles. Here's the scoop.
2006 List of Tax Scams Released by IRS
Every year, the IRS issues a list of tax scams. The goal is to alert taxpayers to the lack of merit of certain strategies as well as letting everyone know the IRS will not accept them.
10 Ways to Cut Your Property Taxes
Property taxes are decided collectively by school boards, town boards, legislators, and councils. The tax rate is set by collating the amount of funds an area needs.
Donating Your Car To Charity
Donating a car to charity is not that difficult. However, you need to be aware of the new tax regulations before you donate your car to a non-profit organization. The IRS provides some general rules of thumb on car donations: