What used to be a popular tax gambit before 2004 has lost its fame due to the dramatic decrease in Car donations prices at charity auctions and sales. This was after the American Jobs Creation Act of 2004 was enacted, which limited the possible tax deductions a person could gain from donating any vehicles worth more than $500. The deduction is now determined by the car’s price it garnered for the charity.
If you are considering to donate cars to charity, here are some of the vital reasons why you have to give it a try:
Your vehicle will be used for a good cause
Charitable institutions can utilize second-hand but functional vehicles in doing their functions, such as going on missions, reach-out programs, and delivering donations to people from far-flung areas.
You can donate used cars to local communities, such as vocational schools or colleges, whose students can use the vehicle to train as mechanics. You can also send them to Salvation Army, Goodwill, or United Way.
Charities will pick them up for free
Most charities will tow away and collect the donated vehicle without any charges. The downside to this is that this will get deducted from the vehicle’s total value so that you will have a lesser amount in terms of tax deduction. If this is something of concern, you can always choose to drive the vehicle to the institution of your choice.
You will avoid the tons of work involved in selling your vehicle
It is not easy to sell a used vehicle, involving effort, money, and risks. If you are selling your car yourself, you have to make the necessary phone calls, emails, and meet-ups with potential buyers. You need to pay for ads and always be ready to haggle over its sales price.
You will free up space it occupies in your garage
When you donate cars to charity, you are doing yourself a favor, especially when you need the space. You can also donate cars with lost titles. Charities can opt to sell their parts or scrap, so they’d accept them even without the proper papers. This will give you a lower tax deduction, but on the good side, you won’t be prompted to spend in replacing the lost title.
You will still get a tax deduction from the donated car
The process may be different now than the years before the law was enacted, but at least, you will still benefit in the process. You only have to make sure to deal with the donation process legally.
You need to get the vehicle assessed by an independent appraisal team if it is worth more than $5,000. You will include the result, along with the charity’s certification and Form 8283, when you file for your return. If the vehicle is worth more than $500, you will need to attach IRS Form 8283 in your return.
It is vital to document the process and keep the papers involved when you donate cars to charity. You must also make sure that you donate to qualified and legal organizations.