The 3 Important Facts You Need to Know before you Donate car for tax credit

Donating your car to charity organizations can result in considerable tax savings if you include it in your annual charitable contribution deductions. Nevertheless, it is not as straightforward as you may think. There are potential scams, grave tax issues, and other drawbacks that could

render the process morally and financially worthless. To successfully donate car for tax credit, you must comprehend both tax rules and other factors that revolve around the car donation industry. Otherwise, that well-intended deed of largesse might turn out to be frustrating.

#1 – Find a genuine charity organization

There are thousands of reports from all over the country of vehicles being donated inadvertently to organizations which weren’t approved by the IRS. Obviously, this means that the donor will not be in a position to claim the full value of the deductions. To alleviate these concerns always request for documentation proving the organization’s status. Usually, legitimate organizations are section 501(c) (3) organizations.

#2 – Transfer of ownership

This is very important. You must make sure that an appropriate transfer of ownership has taken place when you donate car for tax credit. If the car is not correctly transferred, you could be held accountable for any liabilities associated with the car once it leaves your care. These liabilities may include ticket fees and related bills, or likelihood of trouble in case the car gets involved in any sort of crime or accident.

#3 – General car donation tax regulations

Everyone has a unique tax status, but generally the following are some decisive issues concerning tax regulations and donating a car for credit.

• Make sure the charity is qualified to receive tax-deductible I.e. ensure it is a 501 (c) (3) non-profit organization.
• The charity organization you donate a car to should send you a written response (receipt) within 30 days showing how much the car cost.
• In case the fair market value of the donated car exceeds $500, you will be required to file IRS form 8283
• If the car retails for less than $500 but in actual sense, it has a fair market value at that range, you may be able to claim the full credit.
• Regardless of how much a charity organization sells your donated vehicle, your deduction cannot go above the value of your donation.

Another point to be aware of is that, your tax credit will always be directly affected by the manner your vehicle is used. In some instances, charitable organizations may give the car to someone in need or use it for their transportation needs. This should not worry you; most people will still be in a position to take the maximum tax credit if they can provide evidence of this kind of use. This, however, shows the significance of discussing with the organization how they intend to use the car before making a donation.

To donate car for tax credit, therefore, is a prudent way to help those in need while at the same time reducing your financial burden. With that said, if not gifted properly, your charitable actions could be worthless. To be completely certain about the whole process, consider discussing your donation plans with a tax advisor or an attorney.