It’s not hard to claim the maximum tax deduction for your car donation. Here’s what you have to know.
Prior to January 2005, the IRS was allowing people who donated to a qualified car donation program to take a tax deduction based on their vehicle's market value no matter how much or how little the vehicle sold for. Determining the market value of a donated vehicle is often quite difficult and time-consuming, which made determination of the amount of the tax deduction confusing.
In 2010, if you donate a car to charity, subsequent policies utilize:
- The vehicle you donate cannot be one particular that is held by you primarily for sale to other people, this sort of as the inventory of a employed automobile whole lot
- If the charity to which you donate the auto sells the car, your deduction may possibly not exceed the gross proceeds of the sale.
- If the car sells for $500 or significantly less, you could deduct $500 or the reasonable marketplace worth of the motor vehicle on the date that you make the contribution, whichever is reduce.
- You will need to meet certain record holding and filing prerequisites in purchase to acquire a deduction that exceeds $500.
- If the charity offers or sells the vehicle instantly to a needy particular person at a selling price appreciably under the reasonable marketplace worth as portion of the charity's stated mission, you may be in a position to deduct the vehicle's fair industry appeal on the date of the donation.
- If the charity states that it intends to make a content development to the car just before selling the car, you may well be ready to deduct the fair industry worth of the motor vehicle.
- If the charity intends to continue to keep the auto and use it as element of its mission for a substantial length of time, you could be capable to deduct the fair sector value of the car.