How to Get a Tax Write-Off for a Junk Car Donation - KTEN.com - Texoma news, weather and sports

How to Get a Tax Write-Off for a Junk Car Donation

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Originally posted on https://www.cashcarsbuyer.com/how-to-get-a-tax-write-off-for-a-junk-car-donation/

 

Did you know that over 10 million vehicles are recycled each year in the United States?

This is a good thing. However, out of all those recycled vehicles, there could be a considerable amount that still has some life left in them. Sometimes all it takes is a little TLC and some elbow grease to coax a few extra miles out of the engine.

That doesn’t mean you have to hold on to that old car forever. But you also don’t have to send it away so soon. In other words, you can make a junk car donation to your local charity.

As the old saying goes, one man’s trash is another man’s treasure.

If you’re wondering about the how, the why, and the what’s in it for me?—keep on reading to find out more about donating your junk car.

Why Make a Junk Car Donation?

Sure, you could sell your old car and keep the money for yourself. But let’s be honest, depending on what you’re selling, that could take a long time. You’ll also have to put money into the car to spruce it up and fix anything that’s broken. After all, nobody wants to buy a lemon.

If your car has served its purpose and it’s time to move on, why not donate it? By donating your junk car you will:

Receive a Decent Tax Write-Off

The tax-write off process has become a bit more complicated since the law changed back in 2004. But you can still get a deduction at the fair market value.

Provide the Charity of Your Choice with Transportation

If the car you donate is in working condition, the charity can use it for making deliveries, transporting people for activities or doctor’s appointments and things of that nature.

Avoid the Hassle of Selling a Car Without a Title

Some charities will still accept titleless cars. They’ll only be able to sell it for scrap parts, which will reduce the value of your tax deduction. But it’s better than going through the process of getting a new title.

Get Free Pick-Up

Of course, you can always just drive the car in yourself. But it’s convenient if you plan to donate a broken car. Of course, the tow services will come out of your tax deduction.

A junk car donation is a win-win situation. You get to feel good about helping a charity that you support, and you can get rid of your old car that much faster.

How do I Donate My Old Car?

Chances are there are several charities in your area that will take a junk car donation. Here’s how the process goes:

  1. Pick a charity, and make sure that they’re reputable. They must be a legitimate 501(c)(3) charitable organization. If you’re unsure, you can check with the IRS.
  2. Transfer the title over to the charity and update the vehicle’s registration. You’ll also have to remove the license plate and registration sticker.
  3. Let the charity tow the vehicle. (This service should be free).
  4. Keep an itemized record of your donation along with the fair market value of the vehicle. You’ll need this documentation for tax purposes later.

Of course, if you’re not in a rush, you can always go ahead and sell the vehicle privately. This option lets you donate the cash directly, which still gives you a tax write-off. Of course, this could also mean spending the extra cash to make it sellable—it all depends on the condition of your vehicle.

How to Find a Reputable Charity

Finding a reputable charity to donate your old car to can get a little tricky. Most charities don’t actually handle the donation process themselves. They generally contract with a commercial or non-profit fundraising organization who will handle all the details—and take a cut of the proceeds for themselves.

Whatever is left over goes to the charity.

You can go directly through the third-party organization yourself. However, it’s crucial to make sure the middle man handling all of the details forward 75 percent or more of the profits to the actual charity. (Anything less than 60 percent is unacceptable).

You’ll also have to make sure that the title of your vehicle is transferred using the name of the charity. If the organization handling the details doesn’t do this, the IRS won’t be happy.

There are a few other things to look out for as well:

  • How much does your charity of choice spend on administration costs? Good charities will only spend 15 percent or less on operations and the rest on their cause.
  • Does the charity outsource to a commercial or non-profit organization to handle the details? As mentioned above, this will affect how much is actually donated to the charity.
  • Is the charity going to tow the vehicle for you? If they charge you for the towing service, you may want to rethink your choice.

Your best bet is to find a charity that checks all of these boxes and receives the donations directly—without a third-party organization.

Can I Donate a Broken Car?

Although some charities will only accept your car if it’s running, most will take just about anything. Once a charity accepts your donation, they’ll either sell the vehicle at a car auction or scrap it for parts.

If you’re unsure about your vehicle’s condition, you can always send photos and a description of it to the charity of choice. They’ll decide whether it’s worth taking or not.

You can also check with the charity’s 501(c)(3) on the IRS website. It should specify what the charity is willing to accept. (And don’t forget, you can always junk your car and donate the cash).

How Does the Tax Deduction Work?

The IRS (Internal Revenue Service) requires that you calculate your deduction in one of two ways: deductions for the vehicles that the charity sells (which are limited to the sales price). Or, you can use the vehicle’s fair market value.

Here’s what you’ll need to do, step by step:

Step 1: Find Out if the Charity Sold the Car

Whatever the charity sells your car for is the amount you are able to deduct. So, if the charity sells the car for $1,000, that’s how much your deduction is limited too. (Even if your vehicle’s fair market value surpasses that amount).

Step 2: Figure Out Your Vehicle’s Fair Market Value

In order to do this, you’ll want to look up your vehicle’s private party price. You’ll be able to find this in the . Make sure you make a copy to keep in your records.

Step 3: Claim Your Deduction

If you choose to this without an accountant or tax professional, you’ll need to get the form 1040 to itemize your deductions. (Your deductions can’t be equal to or more than half of your adjusted gross income).

Make sure you obtain a Schedule A for your 1040. Find the section labeled as gifts to charity. This is where you will enter the market value of your vehicle donation.

Step 4: Fill Out Any Additional Forms

If your deduction amount is greater than $500, then you will also need to fill out form 8283. For any amount between $501 and $5,000, you will fill out Section A of form 8283.

If the amount exceeds $5,000, you will fill out Section B of form 8283. If you are filling out Section B, you must also obtain documentation of a written appraisal.

Step 5: Have the Proper Documentation

You want to be able to substantiate your contribution. In fact, the IRS requires it. Make sure you receive a written acknowledgment from the charity which you donated to.

The written acknowledgment should include the following:

  • The name of the organization
  • The amount of the contribution (this would be the value of the vehicle)
  • A detailed description of what was donated
  • A formal statement that ensures no goods or services of any kind were given in exchange for your donation
  • Your name, the vehicle registration number, and the date of your donation

You’ll also want to have copies of all documentation in the event of an audit.

Other Things You Should Know

If the charity sells your car for the amount of $500 or less, you can deduct up to $500 or the fair market value of your vehicle (whichever is less). For example, if the fair market value of your vehicle is $600, but the charity sells it for $300, you can still deduct $500.

Most charities will report the sales price of your vehicle to you on Form 1098-C.

Every Junk Car Donation Counts

If you don’t want to make a junk car donation, you can always cut out the middleman and go the scrapping route. That way, you can donate cash directly to your local charity of choice. If you have any questions about how the junking process works, contact the Cash Car Buyers.

Junk or not, we’ll take it!

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