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Form 8283 and Fairly Determining the Tax Deduction from Your Charitable Auto Donation
from:If there's one thing the IRS loves, it's forms, and your tax deduction itemizations are hardly immune. So, it should come as no surprise that there are some additional forms to fill out and receipts to keep when you're claiming an auto donation as a deduction. Also, as you might imagine, this varies by the value of the gift.
Of course, value to you and I differs a bit when dealing with the IRS. The term “fair market value” led to some speculation in the past until the term was clarified to mean specifically what another party would be willing to pay for your vehicle in the fanr an open marketplace.
For instance, if a car is worth less than $250 you may claim tax deductions without any evidence to back up your claim. Indeed, you could claim several $200 cars had been donated without even supplying evidence of a receipt with your forms, though it should be kept on file with pictures of the car(s) just in case of an audit.
Though such a scenario doesn't effect most people, some people do have access to a steady stream of junk autos. In that case, it is useful to note that your tax deductions for a given year cannot exceed one half your income.
In the case of a vehicle that is worth more than $250 but less than $500, you will need to get a hold of a receipt (and dated) with the charity's name and number on it. This should be kept along with your other receipts for your tax deductions, just in case of an audit someday. Such records should be kept for at least 10 years.
In the case of auto donations, you may claim a tax deduction of up up to $500 or the sale price of the vehicle – whichever is greater. Though, you'll have to back up your tax deduction estimation of $500 with evidence to support that value, such as pictures or an appraisal from a third party.
Of course, hardly anyone has a car worth less than $500 appraised, though this is required of higher value cars. For those vehicles thought to be worth more than $500, though less than $5,000, the charity that you donate to will have to provide you with a Form 8283 with section A filled out. This form will cement your deduction value to the sale price of your car or truck unless it's actually being used by a needy individual or the charitable organization itself.
Herein lies the biggest difference between how one chooses to donate an auto. Since most cars thought to be worth less than $5,000 are sent along to wholesale auction when donated to a third-party agent of your preferred charity, the actual value received for them will be very low compared to what you might get if you took out a classified ad and tried to sell the vehicle yourself.
With a Form 8283 in hand that must be attached to your itemized tax deductions (schedule A on Form 1040), you are then beholden to claim only the amount of money that the charity in question actually received from the sale of your car or truck. On the other hand, if the car is put to actual use, you may claim the full “fair market value.”
As such, the charity will send you a form telling you what use they intend to put your vehicle to, as well as the receipt you received when you transferred the title. All these should be kept in your tax records, just in case. Generally, only an approved Form 8283 is attached to tax deduction schedules.
If your vehicle is thought to be worth more than $5,000 at the time of donation, an independent, written appraisal must take place within 60 days of the donation. Again, you don't need to attach it, but will instead receive a Form 8283 with section B filled out. This will include the appraised value and will the amount you can legally take as a tax deduction.
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