Should you donate your car?
What should you do?
Consider these tax requirements for deductions:
- First off the charity must qualify as a 501(c)(3) organization in order to offer to a tax deduction. ( If that is something you need to find out you can confirm it through the IRS website, additionally you can call them at (877) 829-5500.)
- You may only deduct Fair Market Value under very specific conditions. You must:
- If you use a 1040 tax form it must be your only deduction
- If your going to use a 1040EZ you can not deduct anything for that car!
- The Charity must plan to use the vehicle in it's work
- The Charity sells/gifts your vehicle to a needy person at a rate below fair market value
- If the Charity will be making material improvements to your vehicle in order to extend it's life. Minor services will not count.
- If the Charity decides to auction your vehicle instead of use it, they will try to get as much money as they can from the auction. But if they make a total of $500 or less, you may only deduct the fair market value or $500 you get whichever amount ends up being less.
Fair Market Value?
Receiving Fair Market Value is not common. Few of the cars picked up by charities are fit to give to the people they want to help.
In fact the CEO of 1-800-CharityCars Brian Menzies, told Edmunds.com
"If 5 percent go to our clients, I'm thrilled,...Although we take any car, about one-third go straight to salvage, i.e., junk...The rest are auctioned and the proceeds go to the charity of the donor's choice"
So a $500 tax deduction doesn't seem so bad right?
The benefits you will reap entirely depend on your tax bracket. If you happen to be in the 15% tax bracket and donate a car that is worth $1,000, your reduction in taxes will be $150.
Most vehicle deductions are only $500! If you do the math the average person who donates a car to charity only gets a $75 value out of it, and the worst part is you never even get to see that money.
Well what should you do instead then?
If you wish to learn more about cash for cars call us at (801) 974-9561. We would be glad to answer your questions, and set up a time that's convenient for you to have us remove your vehicle.