Understand Your Charitable Tax Receipt

 
 

Posted Saturday November 15, 2014 by admin

Writing Off Your Car Donation

There are a number of reasons to donate your vehicle to a charity. Aside from the fact that it’s going to a worthy cause and will make you feel good, you can also get a pretty sizable tax deduction from the donation too. However, it’s not automatic; you need to know the steps involved or you’ll end up frustrated when it comes time to write off the donation.

Consult a Tax Advisor

We’ll go through the steps of handling your charitable tax receipt, but this should be viewed as a primer. Everyone’s individual tax situation is unique, meaning you should speak to a professional about your individual situation before anticipating the benefits of donating your vehicle.

What Qualifies as a Tax Deduction?

Simply having a charitable tax receipt isn’t enough to qualify for a deduction. Everyone, regardless of their activities from the prior year, is entitled to standard deductions. The amount changes every year, but it’s only after you hit that magic number that you can then begin itemizing charitable contributions. These items will go on your Form 1040, found on Schedule A.

It’s important to remember, too, that only qualified charities count. So, again, even if they give you a receipt or otherwise seem professional in their dealings, that’s not necessarily a guarantee that you’re donating to a philanthropy that will provide you with a deduction in return.

Also, you have to claim the same year the donation was made. This may seem obvious, but many try to file their charitable tax receipt in April for a vehicle they donated in February. The donation is considered deductible for the year it’s filed, meaning you have until December, 31st to hand over your vehicle to a charity.

Which Charities Qualify?

Fortunately, most charities you deal with will qualify for a deduction. However, it’s important to be sure by checking for the philanthropy’s 501(c)(3) designation. If they don’t have one (churches, for example, and some small nonprofits aren’t required to file for this designation), simply go to the IRS website to confirm.

Individuals, foreign governments or charities, social welfare organizations and political parties do not count as charitable organization.

Donating Your Car

Know, too, that donating your car isn’t like donating the same amount of cash. For one thing, it has to be considered in “good condition or better.” You also need the charitable tax receipt for your filing. To receive a deduction, your car has to be worth more than $500, meaning you must also file IRS Form 8283 when you do your taxes.

For cars that are valued at over $5,000, you’ll probably need a qualified appraisal to prove to the IRS that this amount is accurate. The world of car donations is, sadly, rife with fraud. So despite your best intentions, the IRS will go over your deduction with a fine-toothed comb. Fortunately, if you follow the above advice, you shouldn’t experience any serious problems.

Although donating your car is an extremely kind gesture, if you want the corresponding deduction on your taxes, you must be sure to follow the law to the letter in itemizing it on your filing.

Keep Your Charitable Tax Receipt for Your Records

Last but not least, whether it’s a charitable tax receipt or some other form, you absolutely have to keep your records in order to deduct anything. Without a written record, you won’t get very far in your deductions or you could end up being audited down the road.

So while it’s great that you want to help people with your charitable contributions, don’t forget how they can help you right back. Remember the above when making deductions at the end of the year.