Posted: Sunday May 7, 02:44 PDT Updated: Sunday May 7, 05:55 PDT
Houston-TX-Texas Car Donations - Donate Car for Tax Deduction - Special Kids Fund
Houston-TX-Texas Car Donations - Donate Car for Tax Deduction - Special Kids Fund
The new tax laws limit the amount donors can claim for their IRS itemized deduction. This article explains the limitations and how to determine the amount of your deduction.
The American Jobs Creation Act providing tax cuts to business was funded in part by increasing taxes to individuals. Approximately $2.4 billion was realized through restrictions on donors to receive the fair market value for car donations. Deductions are now limited to what the vehicle is actually sold for by the charity or a maximum fair market value of $500, if sold for less than $500. As most donated vehicles are sold at dealer auctions, this has resulted in decreases of up to 40% in vehicle donations.
WHEN CAN YOU CLAIM FULL "FAIR MARKET" VALUE?
There are still a few restricted exceptions that allow donors to claim fair market value for their charity car donation. Treasury Department and IRS guidance for these restrictions is limited and they warn that some car donations taken under these exceptions will not be allowed . According to the IRS, donors may claim a deduction of the vehicle's full fair market value only under the following circumstances:
o The charity makes a significant intervening use of the vehicle, such as delivering “meals on wheels”.
o The charity makes a material improvement to the vehicle, i.e., major repairs that significantly increase its value.
o The charity donates or sells the vehicle to a needy individual in need of transportation at a cost significantly below-market price.
DETERMINING THE FAIR MARKET VALUE:
The IRS accepts the Vehicle Donation Industry recommendation that the proper fair market value of a donated vehicle is the private party sale value. This value is shown in guides such as Kelley Blue Book. The actual condition of the vehicle must be taken into consideration in determining the value.
FILING REQUIREMENTS UNDER THE NEW LAW:
o The charity must provide the donor a written acknowledgment (a tax receipt or Form 1098C) within 30 days of selling or placing the vehicle in use. it should state the amount the vehicle sold for, if over $500, or that it is eligible for the fair market value deduction due to the 'intervening use'.
o The donor must file the tax receipt or 1098C with their tax return, if claiming more than $500.
o Charities must file a form 1098C with the IRS for all vehicle donations including donor Social Security number and Vehicle Identification Number.
IRS LINKS:
IRS Warns of Questionable Deductions for Donated Vehicles
Charitable Donations of Vehicles
IRS Guidance Explains New Rules for Vehicle Donations
Note: It is the donor’s responsibility to accurately determine the vehicle ‘fair market’ value and your tax status. Consult your tax advisor to determine your individual tax situation.
Houston-TX-Texas Car Donations - Donate Car for Tax Deduction
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