Get The Most Benefits From Your Car Donations To Charity
Several people have started doing things that help their communities by providing cars, RVs, boats, motorcycles and other transportation vehicles to charities. There are several purposes to making car donations to charity including the undeniable tax benefits you can be given from the large deductions you will be able to take; however, the IRS has taken a dim view of some of the questionable valuations people make when appraising the value of their donation. Rather than having to clamp down on everyone and pay for more enforcement and auditing, the IRS decided to alter the deduction rules as they pertain to vehicle donations.
The rule changes will not hurt you if you intended to donate a vehicle that you were going to value at less than $500, but otherwise there could be some changes. After all, all new deductions claimed that exceed $500 are subject to these new rule changes so be sure to read the rule changes very carefully. The regulations that the IRS has now crafted are not extremely difficult to comprehend, if you have donated a vehicle to a charity that qualifies then you are allowed to claim deductions up to the exact dollar amount that the charity resells the vehicle for. What this means in a nutshell is that you are not now eligible to claim the blue book value for your car as the IRS is more interested in what the vehicle is worth on the market and not what its theoretical value would be in a perfect world.
Charitable organizations have been informed of the rule changes so they should be able to help handle the changes for you without any trouble. If you wish to donate a car to a charity you will need to arrange a means of delivery with the charity and then the charity should attempt to resell the vehicle in the future. Once the auction for the vehicle has been held and the vehicle has been sold the charity will send you a memorandum that displays what the gross proceeds from the auction of the vehicle were. In theory this memo should be in the form of Form 1098-C, but this is not always technically required. After you get this information, you can take the deduction from the gross proceeds on Schedule A and attach the Form 1098-C you have been given to your return. However, if the charity informs you of the sale via a written letter, you should attach this letter to your tax return so that you can show documentation that you are in compliance.