Elements of Donating a Used Car

If you own more than one or two cars then you may consider donating the additional older used car to charity. Any citizen ordinarily resident in America can legally donate a used car to Charity. This will help him to save on federal individual tax. In case you are in the high tax bracket then it is good business sense to donate the car and claim exemption of tax from the IRS. However in case your tax bracket is low then donating a car to charity by itself, may not give you much benefit in terms of savings on tax.

Remember when you donate a car to charity like Purple Heart or the Salvation Army you will feel elevated and the act will give you great joy. If you were to sell your used car you will have to advertise as well as pay for the advertisement. You will also have to attend to prospective buyers. For all this trouble the payment you receive may not be much. In contrast the charitable organization will take over the car in 2 or 3 working days. They will also tow it away (if not in running condition) at their cost.

However the tax deduction by itself is only $ 500 in case the car is donated to a charitable institution. In case you donate a used car for a higher value i.e. above $ 500 then a separate form will have to be completed. You will also require the charitable institution to give a receipt for the car. However do bear in mind that rules framed by the IRS are followed as a rule. Firstly the donor of the used car must donate the car to a charity that must have a 501(c) (3) status. This can be verified from the IRS website or you may consult publication 78.This publication lists all trusts and organizations that qualify for tax deductible donations.

Secondly your identification documents and what you want to donate must be clear. This is important as the donee organization has to issue a receipt which will have your details like your social security number, VIN of your car etc. For tax deduction, the Charity must mention what they plan to do with your gift. No claim for tax deduction will be accepted without this letter.

The charity may sell the car; in that case the actual sale price will be valid. But in case they plan to keep the car for their use then the fair market value will have to be calculated. The correct MV will have a direct bearing on the model, mileage, type -automatic or manual and location.

Bear in mind that in case market value of your car is more than $500 the deduction in tax is only up to this amount. Lastly the cars title must be transferred to the new owner. Only then will the donation be considered valid.

A lot many people are unaware as to the methodology of filing a tax return and more so to claim eligible deduction. Remember when you file your return the deductions claimed by you should be listed out serially. You'll also have to calculate whether your total deductions are greater than the standard deductions .You should also be aware that your charitable donations cannot be greater than 50 percent of your total income. Many people feel that donating a used old car is opening the door for people to save money on tax. Perhaps it is true to an extant but the fact remains that donating a used old car will give you great satisfaction