Charitable contribution deductions are a fairly familiar concept for most taxpayers. Aside from monetary forms, however, tax deductions can also come in the guise of a New York car donation endeavor. The question is: how do car donors go about it? An excerpt from Kay Bell’s Fox Business article dated June 28, 2013 might shed some light on the process and the possible tax breaks waiting:
“Giving away a clunker to a charity was once straightforward. You could claim the old car’s fair market value, that is, the amount a willing buyer would pay a willing seller for a product. Typically, you’d refer to auto valuation services, such as the Kelley Blue Book, to get an idea of the donated car’s value, give it to your favorite nonprofit and then drive off with a tax break equal to that valuation amount. No more.”
So how do tax deductions for car donations work? Here’s a quick step-by-step explanation.
Step 1: Find out how much the recipient sold the vehicle for. Donors can use the price the charity sells the car for as basis for the deduction’s amount. For instance, if the vehicle was sold at an auction for $3,000, owners can claim a deduction equal to the selling amount, despite a higher fair market value in some instances. If the charity sells the car for $500 or less, however, donors can opt to deduct an amount equal to the fair market value.
Step 2: Know the car’s fair market value. The car’s value can also be determined by using IRS-approved resources such as reliable used-car price guides. Such resources, like the Kelley Blue Book, are available in most local libraries and even online. The Kelley Blue Book works by listing all relevant car models and makes, and the specific values that come with them. It is an indispensable source of information for people looking to either sell or donate a car in New York and elsewhere.
Step 3: Claim the tax deduction. Donors can now report their deduction amounts to the IRS’ line 17 of Schedule A for pertinent processing, once the donation is itemized. They must remember that the total of all eligible expenses on Schedule A must exceed the standard deduction amount for their filing status. Using TurboTax to prepare the taxes can help donors maximize available tax savings.
It’s truly a win-win situation when you donate cars to the needy with the help of entities like Miles Ahead Donations. Charities get an indispensable piece of equipment, and you get to keep a bigger portion of your salary by virtue of a tax break. As a regular taxpayer, even you need a refreshing breather once in a while.
(Source; Tax Benefits of Donating a Vehicle, Fox Business, June 28, 2013)