Donating My Car – Sometimes it can be a very good idea to donate your car to charity because it may have a significant effect on your tax savings. It is however very important to plan well so that you can obtain a maximum tax deduction from your donation to charity. The IRS demands that you must do your tax deduction calculation in one way from two possible ways, with respect to the way in which the charity organization benefits from your donation. If the charity organization sells the car, the deductions are usually made with respect to the price of the sale. In some other instances, you can apply the market value of the car.
Below Are the Possible Steps You Can Take in Ensuring A Maximum Tax Deduction from Your Car Donation to Charity
Try to Find Out the Actual Sale Price of The Car
You can use the sale price you have obtained from the charity as the total value of your tax deduction. For instance, If the car was auctioned for about $4000, then bear in mind that your tax deduction will only be within the neighborhood of $4000, regardless of whether or not the actual market value is higher. On the other hand, if the car was sold at a subsidized rate to an individual who is in need of it, or if the charity organization decides to keep the car for the day-to-day running of the organization, then you have every right to demand a deduction of tax for the actual market value of the car.
Decide the Actual Market Value of The Car
The Internal Revenue Service advised that you should always employ a reputable price guide for used cars to make your calculations when you want to use an actual market value for your tax deduction. You can do research to find out the appropriate market value for your car based on the condition of the car, its model and quality.
Complete the Additional Forms
Form 8283 is there for you to complete in case the deduction from your donation to charity goes beyond $500. On the other hand, if your deduction from your donation ranges from 501 dollars to 5000 dollars, then section A form will be there for you to fill. In the case where your tax deduction goes beyond 5000 dollars, you must fill the section B. Note that you have to get documentation in the form of appraisal if you fill section B.
Claim Your Tax Deductions Quickly
You have to prepare your tax deductions file as quickly as possible and send a report of the amount on Schedule A. This is because before you can confidently lay claim to your tax deductions you have to itemize everything and that includes the total amount of your expenses that are considered as eligible. You can find tools or tax preparation agents to help you out for a small fee.
It necessary for you to document your donation to charity. The document should include certain personal information like your name, your donation date, and the license number of the car. These are all necessary. – Donating My Car