Donating An Automobile To Charity? Don’t Forget The Tax Deductions!
When donating an automobile to charity, you’ll want to think about tax deductions. According to Publication 4303, the Internal Revenue Service (IRS) and state charity officials provide general guidelines for donations.
In the case than an individual is eligible to deduct charitable donations for federal income tax purposes, there are steps that must be taken. Only if the charity receiving the vehicle is a qualified organization, can this happen. Charitable, religious, and educational organizations usually qualify.
To verify a charity organization, simply call the account services division of the IRS and see if it has tax exemption status. If an organization is located at a church, synagogue, temple, or mosque, it is not required to apply for exemption.
Some charity only allows for limited tax deductions. Your tax deduction cannot exceed 50 percent of your adjusted gross income and other limitations may apply as well. You can research a specific type of charity contribution and learn how it will affect your taxes. Generally though, the largest amount of money you can deduct from your income tax return is simply the fair value of your automobile – whatever price a person would buy it for.
It is important to take care of the vehicle’s records, as they may be required to authenticate your donation. Furthermore, if you plan to deduct more than $250, you should ask for a written acknowledgment from the charity about the donation. The document should feature the name of the charity, a description of the automobile, a statement that clarifies that no goods or services, beyond religious guidance or instruction, were exchanged for the automobile.
You must obtain this written acknowledgment on or before the due date of your return; the same year you donated the vehicle. It can be a paper copy or a mere e-mail.
As for charities, they must be available for public inspection so as to secure their tax exemption status. As well, they must provide documents that show their annual returns.