Charity Vehicle Donations – Easy Guide to Charity Vehicle Donations

Filing tax returns that include charity vehicle donations is not always a straight forward process. In years gone by the IRS (Internal Revenue Service) was much more lenient in determining vehicle worth and the legitimacy of charity vehicle donations. Because of too many inflated claims however, there are now a few more restrictions and requirements for both donors and their selected charities. This article will simplify the procedure, and help you to tick all the boxes when filing your claim so that you receive the greatest benefit and minimal hassle when requesting tax relief for charity vehicle donations.

Understanding Charity Vehicle Donations

Making charity vehicle donations was once uncomplicated and easy. You would donate your old vehicle to a chosen charity claiming its fair market value through consulting the Kelley Blue Book, and then sit back and collect your tax break. Not so anymore! Because of unscrupulous persons sending in highly inflated claims in years gone by, the IRS has now re-evaluated its claim procedure if you wish to donate a vehicle to charity, though knowledgeable consumers can still receive substantial relief if filing correctly. In order to do so however, one must have a clear understanding of the new procedures required by the IRS.

The $500 Ceiling on Charity Vehicle Donations

Vehicular gifts are now mostly governed by a $500 limit which applies to cars, trucks, vans, airplanes and boats. Of the value of your charity vehicle donations exceeds that amount, the claims procedure becomes increasingly complex. This limit becomes active when the vehicle is sold by the charity, the amount received for the sale directly influencing the total of tax relief you are due. At one point in time you would get the fair market value of your vehicle in relief, no matter what the charity sold it for, but that has now changed and only the sales price is relevant. The charity is also responsible for informing you of any IRS allowance restrictions or limitations to which they are subject, and must do so either within 30 days of you making your charity vehicle donation, or within 30 days of its subsequent sale.

Charity Vehicle Donations and Exceptions

There are a few exceptions to the new charity vehicle donations law that will allow donors to occasionally claim the fair market value of their vehicle. One such case is for example; if you donated a vehicle worth $1,000 to a charity such as Meals-on-Wheels and they used the auto to deliver food for several months, and then sold it for less than the FMV (Fair Market Value) of $1,000, you would still be able to claim the full amount if you have received the proper documentation from the charity. This would include the receipt for the amount that the vehicle was sold for, as well as a written acknowledgement that the vehicle was used for charitable purposes in the interim. The IRS classifies this as "intervening Use", which entitles the donor to claim the full $1,000 FMV. The full amount may also be claimed if the charity makes any repairs or upgrades to the vehicle, but you must obtain copies of those receipts to include with your claim.

Low Sale Prices and Charity Vehicle Donations

If a charity sells your vehicle for a very low price, say for two or three hundred dollars, you may in some cases be able to claim the full $500 threshold amount. Even if the charity gives your vehicle away to someone in need, the IRS may approve the full claim sum, as long as the vehicle was given to further the charity's work. No matter how an organization disposes of any charity vehicle donations though, a donor is only entitled to its designated fair market value.

The worth of charity vehicle donations also depends on your income bracket, as deductions go towards reducing your taxable income, not your final tax bill. For example, a deduction of $500 won't take that amount off of your tax bill, but if you are in a 25% bracket, will reduce your taxes by $125. If you would rather have the money in hand rather than a small tax break, better off selling your car, but if you are a generous sort, charity vehicle donations may be the way to go.