Do you have an old car that you don’t use anymore? Are you thinking of selling it or donating it? People sometimes decide to donate their old car or broken car because the cost of repair to fix it is much more than its value. Finding the right charity can be hard at times. Just make sure that your chosen charity is IRS accredited.
So if you have old car why not donate car for tax credit. So in this article I am going to walk you through on how to donate car for tax credit.
1. Select the Right Charity
If you want to claim a tax deduction for your donation, you should make sure that the charity or organization is qualified, otherwise, you can’t claim a tax deduction for your donation. The most qualified charities are section 501(c)(3) organizations like religious groups, educational and charitable organizations. To verify if the charity is qualified, you can check the IRS website “EO Select Check” tool, or you may also call the IRS tax-exempt division toll-free at (877) 829-5500. When calling, make sure that you have the charity’s name and address. Selecting the right charity is the first step to take if you are to donate car for tax credit.
2. Qualify for Tax deduction
You need to itemize your deduction on your 1040 Form (Schedule A) to be able to deduct your contribution to the charity. Qualifying for tax deduction is the second step to take if you are to donate car for tax credit.
3. Determine the amount you can claim
If your car contribution is more than $500, you need to furnish a written acknowledgement. It must contain the following;
i. Your name and your TIN (Tax Identification Number).
ii. The VIN (Vehicle identification number) of your car.
iii. The date of your donation and a statement that you didn’t receive anything in return from the charity.
v. A statement that there was no service provided by the charity.
Note: The tax deduction may not exceed $500 if the written acknowledgment does not include all the information. Determining the amount you can claim is the third step to take if you are to donate car for tax credit.
4. If your tax deduction is at least $250 and less than $500, you need to submit a written acknowledgment that lists the following:
A. Name of the charity.
B. Description of your car.
C. One of the following: Value of the car that the charity provided and the statement you didn’t receive anything from the charity in return for your contribution/donation. Submitting a written acknowledgement is the fourth step to take if you are to donate car for tax credit.
5. If the charity was able to sell your vehicle, the amount of your deduction is limited to the amount the charity got from the sale
Aside from the indicated information above, the written acknowledgment must contain the following:
A certified statement that the car was not sold to a relative or friend or related parties, the date the car was sold, the amount of money received from the transaction and a statement that your tax claim may not exceed the amount of the sale. Submitting of a certified statement is the fifth step to take if you are to donate car for tax credit.
6. There is an exemption to the gross limit
You may be eligible to claim the market value of your car on the date you gave it if one of the following applies:
i. The written acknowledgment contains a statement that the charity plans to make an important intervening use of the car. It should have a detailed description of where to use it or its purpose and the amount of time the charity is going to use the car. Also, it should contain a statement that your car will not be sold before the said duration.
ii. The written acknowledgment must contain a statement that the charity plans to make an improvement to the car. It should be in the detailed description like what parts need to be replaced, etc. It must also include a statement that the charity will not sell your car before the completion of the said planned improvement.
iii. The written acknowledgment should contain a statement that the charity or organization plans to give or sell your car to the needy below the fair market value of your car. It must also contain a statement that the charity will sell the car to the poor or needy to help the underprivileged who needs transportation.
Note: You must get a written acknowledgement from the charity within 30 days from the time you donated your car. That is the sixth step to take if you are to donate car for tax credit.
7. The form that the charity should use is 1098-C (Contributions of Motor Vehicles, Boats, and Airplanes)
Make sure you attach the Form 8283 (Non cash Charitable Contributions) and the written acknowledgment to your return. That is the seventh step to take if you are to donate car for tax credit.
8. Keep all the records filing requirements
Make sure that you have all the necessary documents before you file your taxes. That is the eighth step to take if you are to donate car for tax credit.
9. Do a Title Transfer
Some charities do the paperwork, and they also pick up your vehicle free of charge. When transferring your title, you must submit an odometer reading, title transfer application and the VIN to the Department of Motor Vehicle. That is the ninth step to take if you are to donate car for tax credit.
10. Surrender plate number.
Some states will require you to cancel plate and tags and surrender it to the DMV. Some states may only require you a notice of transfer. That is the ninth step to take if you are to donate car for tax credit.
Note: You should not submit a 1098-C when donating a qualified vehicle worth $500 or less. It can, however, serve as the required written acknowledgment. To use it for that purpose, submit Copy C only.
Always ask for a certified receipt for a car or any donation you make. Always consult your tax professional on how to claim and maximize your tax deductions.
For additional questions related to car donations in California, you can contact your local DMV or visit the California DMV website for the latest information on state specific requirements.
- General Gowon Has Been Accused Of Stealing Half Of Central Bank - November 28, 2020
- Argentina Football Legend Diego Maradona Dies Of Cardiovascular Arrest At Age 60 - November 26, 2020
- CNN Finally Destroyed Buhari Government With New Evidence On Lekki Toll Gate - November 25, 2020