You might often have wondered: Why should I donate my car? The moment you hear about tax deductions on used car donations, you would probably ask: how much tax can I save if I donate my car today? The actual amount you can save would be determined by two entirely different things: the fair market value of the used car and what the organization receiving the car does with it.
The fair market value of a car is the amount I could sell it for on the day I donate my car. To estimate the fair market value or FMV, you may follow professional guides to find out the actual condition of your car. These guides offer objective ways to classify your used car as being in excellent, good, fair or poor condition. That classification will help you answer the question: How much tax benefit will I get if I donate my car to a charitable organization?
The other factor that determines the quantum of my tax deduction for the donation is its usage after I donate my car. If the charity sells the car without any major changes, and the selling price is over 0, the selling price will be deducted from your tax. An IRS Form 1098-c has to be filled by the organization receiving the donation. In case the selling price is less than 0, the Fair Market Value can be claimed as the deduction, to a maximum of 0.
I can claim tax deduction equal to the FMV if I donate my car as long as it is less than the amount I bought the car for if the charity sells the car after making significant improvements; the charity plans on keeping your car and using it for their purposes; the charity intends to donate the car to a needy person or sell it to them for much less that its FMV and proper documentation is provided regarding the intent, duration and execution of the plans. These provisions exist to ensure that when I donate my car. Neither I nor the charity organization can misuse the donation to gain monetary benefits.
Written by CharityDispatch
tags: Donate, Should