We’ve all heard the ads put out by charities calling for donations of an old or unwanted car, truck, or other vehicle. If you’re considering this type of donation, it’s important to make sure you have all the necessary information before you take action. Read on to find out more!
If you want to donate your vehicle to charity and claim a tax deduction for that donation, you first have to confirm that the organization you have in mind is eligible to accept tax-deductible contributions. This is also known as being “tax exempt.”
501(c)(3) organizations are typically tax exempt. Many religious organizations are also eligible to accept tax-deductible contributions, although they may not have 501(c)(3) status. It’s definitely in your best interest to confirm an organization’s status before you make a vehicle donation!
The next element you need to consider is how you want to file your taxes. You can’t claim a tax deduction for donating your vehicle unless you itemize your deductions (versus taking the standard deduction). It usually only makes sense to do this if the total of your itemized deductions will amount to more than the standard deduction.
This leads to the next major step you should take before donating a vehicle: find out its value. If you donate a vehicle to charity, you have to know how much the vehicle is worth (its fair market value). This does not mean, however, that you can necessarily deduct that whole amount.
If the charity sells your vehicle, you can only claim the amount they made on the sale. If the charity keeps the vehicle and uses it in pursuit of its charitable work, you can claim up to the fair market value of the vehicle. If the charity sells your vehicle for $500 or less, you can claim the lesser of $500 or the fair market value.
All of these details can get complicated quickly! That’s where Taxation Solutions, Inc. comes in. If you’re in the Indianapolis area and you need guidance regarding vehicle donations and deductions, give us a call. We’re here to make sure you have all the details you need to make an informed decision about vehicle donations and other tax deductible contributions.