Every good turn deserves another, but why wait for karma to influence the universe in your favor when you can do it yourself? You can give yourself a significant tax deduction when you donate your car. Most people already know that though; the real question is how. Fortunately, there’s a simple way of understanding the process; just keep reading.
The first thing you need to do is to find out how much the car sold for after you donated it to charity, that number will be the exact amount you’ll be able to deduct from your taxes. This is very good news for people who donate to us, since we sell our cars through an auction. There’s a potential that the value of the vehicle might get higher than you initially anticipated.
We grant drivers an automatic five hundred dollar fair market value deduction and inform the original owners when their vehicles exceed that amount. If you decide to use the fair market value as the deductible, the IRS suggests using a reputable price guide to determine the exact value based on make, model, year, and general condition.
Don’t forget to report this deduction on line 7 of Schedule A. This is because the only way anyone can successfully claim a deduction through donation is if the total of their eligible expenses exceeds the standard amount of their filing status. This highlights the importance of itemizing everything on the tax form, to make it easier to calculate.
If the expected deduction is beyond five hundred dollars, you should complete Form 8283. If the deduction is somewhere between five hundred and one and five thousand dollars, complete Section A. If the deduction is greater than five thousand, complete Section B, and get a written appraisal as part of the documentation.
Don’t forget to make sure that the documentation you receive from us includes your name, the Vehicle Identification Number (VIN), the date of the donation, and a statement describing the goods. If you need any more help regarding how to donate your car, or how to deduct it from your taxes, contact us today.