Tax Tips--Car Donations
Do you have a car that you just can't seem to sell or isn't worth much?? Donate it and receive a deduction on your income taxes! Read the following article from the IRS to find out how. Don't forget to check the Internal Revenue Service Websaite at http://irs.gov for more info or other deductions! Until Next Time....
Car Donations
Tax Tip 2005-59, March 24, 2005
The IRS reminds taxpayers that the rules for taking a tax deduction for donating cars to charities have changed for 2005. The American Jobs Creation Act of 2004 has altered the rules for the contribution of used motor vehicles, boats and planes after Dec. 31, 2004. Starting then, if the claimed value of the donated motor vehicle, boat or plane exceeds $500 and the item is sold by the charitable organization, the taxpayer is limited to the gross proceeds from the sale.
In 2004, however, the new rules did not apply. Under the rules in effect for 2004, taxpayers are able to deduct the fair market value of the contributed property.
People who want to take a deduction for the donation of their vehicle on their 2004 tax return should take the following steps:
Check that the Organization is Qualified. Taxpayers must make certain that they contribute their car to an eligible organization; otherwise, their donation will not be tax deductible. Taxpayers can search Publication 78 online to check that an organization is qualified. Publication 78 is an annual, cumulative list of most organizations that are qualified to receive deductible contributions. Publication 78 is also available in many public libraries. In addition, taxpayers can call IRS Tax Exempt/Government Entities Customer Service at 1-877-829-5500. Be sure to have the organization’s correct name and its headquarters location, if possible. Churches, synagogues, temples, mosques and governments are not required to apply for this exemption in order to be qualified. They frequently are not listed in Publication 78. Donations to these institutions are tax deductible.
Itemize in Order to Benefit. Many taxpayers can’t take a deduction for car donations because they don’t itemize deductions on their personal tax return. For taxpayers, the decision to itemize is determined by whether their total itemized deductions are greater than the standard deduction (for 2004, the standard deduction is $4,850 for single filers and $9,700 for married filing jointly). Just under one-third of the nearly 129 million individual taxpayers itemized in 2000, the last year for which complete data is available.
Calculate the Fair Market Value. The donor must take many factors into consideration to establish the value of the car. Many used-car buying guides contain step-by-step instructions so that readers can make adjustments to the value of a car for accessories, mileage and other indicators of its general condition. Publication 526, Charitable Deductions, and Publication 561, Determining the Value of Donated Property, provide detailed instructions.
Deduct Only the Car’s Fair Market Value. Some car donation program operators have mistakenly claimed that donors can take the full value of their car as listed in a used-car buyer’s guide for a deduction. The IRS, however, only allows a deduction for the fair market value of the car. Fair market value takes into account many factors, including the vehicle’s condition. The fair market value of the taxpayer’s car may be substantially different than the full used-car buyer’s guide.
Document the Charitable Contribution Deduction. For vehicle donations, taxpayers must document the car donation and its fair market value. Recordkeeping requirements are comprehensive and vary depending on the amount of the contribution and the total amount of the charitable deduction. Publication 526 details requirements for the types of receipts taxpayers must obtain and the forms they must file.
Contact State Charity and IRS Officials When in Doubt. Donors with questions about whether a contribution is deductible should call the IRS at 1-800-829-1040 or for TTY/TDD help, call 1-800-829-4059. Donors concerned that contributions are being solicited for fraudulent purposes should contact the appropriate state charity official, who is often located in the state attorney general's office. A list of state charity official offices can be found online at the National Association of State Charity Officials, and a list of state attorneys general can be found at the National Association of Attorneys General.
Car Donations
Tax Tip 2005-59, March 24, 2005
The IRS reminds taxpayers that the rules for taking a tax deduction for donating cars to charities have changed for 2005. The American Jobs Creation Act of 2004 has altered the rules for the contribution of used motor vehicles, boats and planes after Dec. 31, 2004. Starting then, if the claimed value of the donated motor vehicle, boat or plane exceeds $500 and the item is sold by the charitable organization, the taxpayer is limited to the gross proceeds from the sale.
In 2004, however, the new rules did not apply. Under the rules in effect for 2004, taxpayers are able to deduct the fair market value of the contributed property.
People who want to take a deduction for the donation of their vehicle on their 2004 tax return should take the following steps:
Check that the Organization is Qualified. Taxpayers must make certain that they contribute their car to an eligible organization; otherwise, their donation will not be tax deductible. Taxpayers can search Publication 78 online to check that an organization is qualified. Publication 78 is an annual, cumulative list of most organizations that are qualified to receive deductible contributions. Publication 78 is also available in many public libraries. In addition, taxpayers can call IRS Tax Exempt/Government Entities Customer Service at 1-877-829-5500. Be sure to have the organization’s correct name and its headquarters location, if possible. Churches, synagogues, temples, mosques and governments are not required to apply for this exemption in order to be qualified. They frequently are not listed in Publication 78. Donations to these institutions are tax deductible.
Itemize in Order to Benefit. Many taxpayers can’t take a deduction for car donations because they don’t itemize deductions on their personal tax return. For taxpayers, the decision to itemize is determined by whether their total itemized deductions are greater than the standard deduction (for 2004, the standard deduction is $4,850 for single filers and $9,700 for married filing jointly). Just under one-third of the nearly 129 million individual taxpayers itemized in 2000, the last year for which complete data is available.
Calculate the Fair Market Value. The donor must take many factors into consideration to establish the value of the car. Many used-car buying guides contain step-by-step instructions so that readers can make adjustments to the value of a car for accessories, mileage and other indicators of its general condition. Publication 526, Charitable Deductions, and Publication 561, Determining the Value of Donated Property, provide detailed instructions.
Deduct Only the Car’s Fair Market Value. Some car donation program operators have mistakenly claimed that donors can take the full value of their car as listed in a used-car buyer’s guide for a deduction. The IRS, however, only allows a deduction for the fair market value of the car. Fair market value takes into account many factors, including the vehicle’s condition. The fair market value of the taxpayer’s car may be substantially different than the full used-car buyer’s guide.
Document the Charitable Contribution Deduction. For vehicle donations, taxpayers must document the car donation and its fair market value. Recordkeeping requirements are comprehensive and vary depending on the amount of the contribution and the total amount of the charitable deduction. Publication 526 details requirements for the types of receipts taxpayers must obtain and the forms they must file.
Contact State Charity and IRS Officials When in Doubt. Donors with questions about whether a contribution is deductible should call the IRS at 1-800-829-1040 or for TTY/TDD help, call 1-800-829-4059. Donors concerned that contributions are being solicited for fraudulent purposes should contact the appropriate state charity official, who is often located in the state attorney general's office. A list of state charity official offices can be found online at the National Association of State Charity Officials, and a list of state attorneys general can be found at the National Association of Attorneys General.
posted by Mama Arika at 9:19 AM
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