Welcome to Car Donation USA
I Need A Car And Home Donation Article
This is a selection made from among articles on I Need A Car And Home Donation. For a permanent link to this article, or to bookmark it for future reading, click here.
Some Special Situations Where Taking Car Donation Deductions Can Actually Increase Your Tax Bill
from:Not all car donation deductions are created equal – there are even cases where donating an auto in good faith can actually increase your tax owed under certain circumstances. Like anything else involving the IRS, the burden of proof is upon you, so the more information and documentation you have to back up your car donation deduction, the better.
Thankfully, just as rules have tightened up for donors, the onus of documenting the ultimate use or destination of a donated car rests with the charity receiving your car donation. Deductions are now tied to the ultimate use of the vehicle. So, if the charity you choose or, the third-party (often for-profit organization) that acts as an intermediary between yourself and said charity, sells your car at a loss, you'd have a hard time claiming fair market value for such a donation. The charity is required to give you a receipt stating the use of the vehicle within 30 days of donation, whether it's actually met its final fate yet or not. If it is used and later sold, you'll receive a new receipt outlining this use, too.
On the other hand, if the charity you choose has a mission that includes using the donated vehicle to further their mission or they sell it at a loss to a needy family, you may still claim the “fair market value.” This may, however, get your return some unwanted attention that you may not welcome for other reasons. If this doesn't sound like a good idea to you, it may be wise to consider something other than car donation for deduction purposes.
Indeed, it pays to be careful of who is receiving your donated auto. This is especially true in the case of car donations and deductions taken from charities that are not recognized as non-profit organizations by the IRS. This is easily checked, and doing so can save you a great deal of heartache later. Charities are required to provide you with information regarding their non-profit status with the IRS and tax ID numbers you can check yourself with the IRS website.
Perhaps the most common happenstance where it doesn't pay to donate a car is when the rest of your allowable deductions for a given year, when added to the car donation deduction, add up to less than the standard deduction allowed you. Of course, this differs depending upon how you file.
For instance, if you file as a head of household you'll have to come up with nearly $2,500 more than if you'd filed as single or married filing separately to reach that standard deduction amount. This can be difficult for those who are simply working for a living as opposed to those who are self-employed.
It is also useful to note that the higher your tax bracket, the less a deduction will actually take off your total tax burden. This is because deductions are taken from your net income, not the total tax as many suppose. As such, legitimate car donation deductions are typically worth about a third after figuring out taxes, less if you're in a higher tax bracket.
That said, in the case of a high value car donation, deductions can make the difference between paying in a higher or lower tax bracket. This can have important implications on your total tax burden that far outstrip the actual value of the car donation. Deductions may, on the other hand, have little or no effect on your final income bracket.
It's always best to check and see how close you are to the edge of a more favorable income bracket near the end of a given year. Since you're allowed to make donations up until the 31st of December, as long as you get a certificate of receipt, it doesn't even matter if the car is hauled away until the next year, as long as you have a piece of paper stating that the initial transaction occurred before the 31st.
However, the regulations that govern how car donation deductions can be valued have seriously impacted the once booming market of car donation. Deductions have fallen sharply as well, and it is estimated that the IRS is now saving more than half a billion dollars per year in reclaimed revenues. Aren't you glad you could help? You should be if your car donation deduction is actually a liability under the new rules.
 |
 |
I Need A Car And Home Donation News
No relevant info was found on this topic.