Car Donation and Tax Deduction

Before 2005, the appeal of donating cars to charity was an idea that a lot of people considered. Old cars, which would not fetch a fair market price, would be donated to charity. In doing so, more valuable tax exemptions are met rather than going through the rigors and tiresome process of having the car appraised, maintained, and sold. Car donors would as get as much as a 100% mark-up value reflected in their tax exemptions compared to the price their beat-up cars would fetch when (and if) sold. Due to this great trade-off, more and more people started donating their old cars to charity since doing so provided a heftier financial benefit to themselves. It is along these lines that the IRS revised the tax benefits that one can take advantage of when donating vehicles.

The New Car Donation Tax Law was made effective on January 1, 2005. It states that only if the claimed value of a donated vehicle, such as a car, a boat or a plane exceeds $500.00 and is then sold by the charitable institution of choice, the taxpayer would be limited only to the gross proceeds of the sale. Furthermore, the charitable organization is given 30 days to issue a receipt of sale of the donated vehicles, if sold by the organization. The said receipt must reflect the amount of gross proceeds.

In the event that the charitable organization uses the vehicle and materially improves it, the charity must also provide receipt of the improvisations undertaken, purpose and duration of vehicle use. In the same way, the charitable institution is given 30 days to accomplish such. In this case, the donor may deduct the vehicle's market value.

Moreover, the new law prohibits donors/taxpayers from estimating the value of their vehicles by themselves for a write-off of over $500. More stringent measures are implemented by the IRS.

Currently, the IRS is working on the degree of ambiguity of the revised car donation law. More clarifications are in order to ensure that fair and equal pay-offs will benefit both the giver and the taker.

Charity Car Donations provides detailed information on Charity Car Donations, Child Charity Car Donations, Catholic Charity Car Donations, Used Car Charity Donations and more. Charity Car Donations is affiliated with Charity Car Donations.

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The IRS has taken steps to take the guesswork and confusion associated with car donation tax deduction with a new law. When January 1, 2005 rolled around, you were able to deduct the full price that the charity of your choice receives for the sale of your car.

Many times people were hesitant to donate their car to a charity that so desperately needs the help simply because of the hassle involved in finding the fair market value of their vehicle if the vehicle was worth more than $500. Often the donator had to look up the car they were looking to donate in the infamous “Blue Book” to get an estimate for the fair market value in order to get the full benefits of a car donation tax deduction.

With the new law if your car sells for more than $500 at the auction where your car will be sold, the charity is obligated to send you a receipt that has your name and vehicle identification number or VIN of your car. They must also state that your donation was “arms length” which means that the person or organization you donated your car to is not related to you in any way whether it is your family or a business associate. They must also include the selling price of your car. This is the fair market value price. It is that simple. No more searching through records and books trying to find the right numbers to make your car donation tax deduction.

If the car you donate is sold for less than $500, it is up to you to determine the fair market value as long as the figure is below $500. The tax receipt that the charity is required to send you will be less detailed and will merely acknowledge your donation. The information included on the tax receipt will be your name, the date of the donation and a brief description of the vehicle.

The simplification of the laws concerning car donation tax deduction is good news for charities. As more people realize the good their car donation can do for others and the ease in which you can itemize your car donation tax deduction, they will be eager to help. Spread the word so that more people donate more cars to help even more people.

For more information about Car Donation Tax Deduction, feel free to visit us at: http://www.car-donation-land.info/article-2-Car-Donation-Tax-Deduction.html

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