Posts Tagged ‘tax deduction’

When Is It A Good Time To Donate A Car?

Monday, August 30th, 2010

Technically speaking, you have between now and midnight on December 31 to donate a car if you plan on taking the tax deduction for 2010. That does not, however, imply that it’s okay – or even a good idea – to wait until December to start the donation process.

The summer months are actually the perfect time to start thinking about your car donation tax deduction. It may seem like the due date is months away, but you can take advantage of the longer days and the nicer weather to get your car ready to go. More than that, the towing companies will be available at your convenience, and you won’t have to fight with all the other people trying to donate their cars at the same time.

The “holiday rush” is always a stressful period, whether you are shopping for gifts or doing your taxes. This is not the time to try and donate a car for your deduction. It’s one thing to run to the accountant at the last minute to get your taxes prepared, but it’s a different thing entirely to try and contact a charity or car donation agency and get your car towed, gather the necessary documentation, wait for the final sale of the car and get the necessary receipts at the last minute. Planning ahead will make tax season a far more manageable experience.

Of course, if you do take care of the car donation during the summer months, you will be responsible for keeping track of your receipts and documentation for a while. You should always keep your tax documents together so that when the time comes you won’t have to run around trying to pull together everything you need to get the best deduction possible. Many of us don’t like to think or plan this far ahead, but when everything is said and done, you will be grateful that you did.

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More Tips For Charity Car Donations

Wednesday, June 23rd, 2010

It’s usually pretty simple and straightforward to donate a car to charity, but there are still a few things you can do to make sure that everything goes smoothly. These tips are often overlooked because they seem like small things, but if you want to get the most out of your vehicle, it’s important to pay attention to every detail.

Make sure of the final destination

A car donation can lead to a fairly significant tax deduction, but only if it goes to the right place. The charitable organization must have 501(c)(3) public charity status in order for your donation to count as a tax deduction. Donations to a 501(c)(4) organizations are usually not tax deductible.

Fully transfer the car

Never just leave the assignment of ownership blank. When you donate the car make sure that it is filled in. If the car ends up getting sold to another user who doesn’t re-license it, you can find yourself in a lot of trouble. Any tickets that they receive or crimes they commit with the vehicle will still be attached to your name. Car donations are meant to help everyone involved, not cause a lot of new legal difficulties.

Finish all the paperwork

In order to get the full car donation tax deduction, you will need to make sure all the paperwork is completed. This means that if the car is worth more than $500 you must also complete and attach the IRS Form 8283.

Value your car correctly

The regulations on donating a car for a tax donation have gotten pretty strict. Since 2005 you can no longer deduct the market value of a car that is worth more than $500. If this is the case for your donation, you will be able to determine your final deduction after the car is sold and you find out exactly how much it went for.

When to use Fair Market Value (FMV)

There are some times when you can still deduct the fair market value for your car donation. FMV is usable when the charity keeps and uses the car, or when they make improvements to the vehicle before selling it. It is also available when the car is sold at a discount to someone with a low income, or just when it is worth less than $500.

We always want to make the donation process as simple as possible, but if you keep these tips in mind it will be even easier to donate your car and help out the best charitable organizations.

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Tax Deductions Still Apply After An Extension

Tuesday, June 1st, 2010

Try as we might, some of us just can’t quite get everything together for the April 15 deadline. We’ve done what we could, but now we need to file for an extension on our 2009 tax returns. If you’re in this situation, don’t feel too bad. More than 8.5 million taxpayers received extensions this year. The good news, though, is that you can still take a car donation tax deduction.

Keep Track of Your Documents

Many taxpayers have made their charitable donation only to lose the all-important tax deduction receipt somewhere between the time the car is taken away and the time to file for a tax return (whether filing for an extension or not). This situation is, of course, only exacerbated when deadlines get stretched out and other things start to get in our way.

The tax deduction receipt is critical to take the appropriate deduction, and it has all the information you (and, of course, the IRS) will need. It has the name of the charity that received the donation as well as its 501(c)3 registration number, the date the donation was made, and a statement that you didn’t receive any financial benefit in return for the donation. Hold onto this document. You will need it to get the full value of the deduction.

Keep Track of Your Deduction

When you’ve done something generous like donating a car to charity, you really do deserve some kind of recognition for it. The government has provided this in the form of a tax deduction, and there is no reason to miss out on it just because you filed for an extension. Get all your records together and make sure that when you do file your taxes you are deducting everything you can.

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How A Tax Deduction Works When You Donate a Car

Tuesday, May 11th, 2010

One of the biggest incentives to entice you to donate a car is the tax deduction that you get from the government. A few years ago, the IRS buckled down on car donations and some things changed, but that doesn’t mean that you still can’t get your car’s value. Here’s how it all works:

  1. When you decide to donate a car to charity, it used to be that you could deduct the fair market value of your car—which is not the same thing as the full “suggested retail price.” However, because people were abusing this, the IRS stepped in.
  2. Now, when you do a car donation to charity, you do not have much (if any) control over the amount you get back from the government. If your car is valued over $500, then your deduction is based on the actual selling price from the charity. This means:
  3. You need to donate your car, and within 30 days, the charity will send you the statement that says the amount for which your car sold. It can be a little scary donating a car without knowing how much money you’ll get back, but that is how it works with every charity organization.
  4. When you file for your deduction, you will need to include this statement of sale with the tax return.
  5. After that, it is easy, since you only need to wait for the money from the government—which is sometimes easier said than done.

The process to donate a car is especially easy, even with the changes from the IRS. It puts a lot more control in the government’s hands, but the end result is the same.

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10 Reasons To Donate A Car

Friday, May 7th, 2010

There has been a lot of talk about car donations to charity, and many people have discovered that this really is a great way to get rid of that old clunker while doing something good for the community or a favorite charitable organization. Everyone seems to have a different reason for donating a car, though. Here are 10 of the best reasons (in no particular order) to consider this as a final option for your vehicle.

  1. The Tax Deduction – A car donation can lead to fairly substantial tax benefits. Every year, hundreds of thousands of people save a lot of money on their taxes because of this deduction.
  2. Help a Family in Need – There are a lot of low income families that could use a working vehicle. It may not be the newest, sweetest thing on the road, but it will get them from place to place, which can be priceless.
  3. Contribute to a Favorite Charity – Charitable organizations need your help. If you have a favorite organization that supports something you believe in, this could be a great way to lend a hand.
  4. Provide the Charity with a Working Vehicle – Sometimes charities need more than money. Sometimes they can put your car straight to use within the organization.
  5. Stop Making Useless Insurance Payments – Why keep paying insurance on that clunker when you never use it? You can easily eliminate this burden.
  6. Stop Making Repairs on Clunkers – At what point have you put more money into your vehicle than it is worth? Donate the car and stop the money drain.
  7. Stop Feeling Unsafe in Your Own Car – Have you ever driven down the road and felt sure that the axel was about to drop out of the car? It’s time to get rid of it.
  8. Reduce Pollution – Those old cars weren’t the most environmentally friendly vehicles around. Donating it will get it off the road and reduce your carbon footprint.
  9. Recycling Potential – Is your car completely unusable? It can always be recycled and put to use in a different way.
  10. Feel Good About Something – Whatever other monetary benefits are involved with this process, you can walk away from your car knowing you’ve done something good.

There are many other good reasons to donate your car to charity, just take some time to consider your options and evaluate your vehicle. Is it doing you any good? Could it do some good for someone else? Car donations may be the simplest, most effective way to deal with those old vehicles.

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