There are many ways by which you can profit from your junk car. Just look at some buy junk cars Minneapolis ads to get a ton of information on how to dispose of your vehicle. One way to benefit from it is through tax breaks.
It is well known that folks that prefer to cut their tax bill and get rid of clutter donate stuff to a church organization. Most of the time the items are used clothing and household items. However, if you are looking to donate something bigger than a stack of old t-shirts such as junk cars for instance, keep in mind that there are rules that govern such transactions. Here is a discussion on the tax breaks for donating junk cars to your church.
Exempt Status For Donating Junk Cars To Your Church
The first step is to determine if the organization you want to donate junk cars to is a qualified charity that is approved by the Internal Revenue Service and has “exempt status” that falls under a 501c(3) organization. The church is one such organization but they are not required to file for 501c (3) status. How much in terms of tax breaks can you get if you donate a junk car to your church? If you think that the vehicle’s market value is a nice way to begin, then you are probably misinformed.
New Rules For Donating Junk Cars To Your Church
Up until 2005, it was quite simple to claim the vehicle’s full market value as the given amount of the charitable tax deduction. However, the IRS decided to investigate and discovered that too many tax filers are claiming massive deductions for their donated junk cars and charities like the church getting significantly less when they sell the cars. It is for this reason that the Internal Revenue Service decided to change the rules.
Determine How Much The Car Was Sold For
To obtain the tax break, determine how much the car was sold by the church as the amount for your deduction. For example, if the church was able to sell the car at auction for $3,000, the deduction would be limited to $3000, regardless if the fair market value is higher say, $4,500. However, if the church sells the vehicle at a discount to a needy buyer or decides to keep the car for its own internal use, only then can you claim a deduction based on the current fair market value.
Determine Fair Market Value
The recommendation of the Internal Revenue Service is to use a trusty used-car price guide and from there determine the deduction when using fair market value. For instance, go online or to a local library to checkout a copy of the Kelley Blue Book. Do a search for the private party prices for your car based on its make, model and current overall condition.
Claiming The Deduction
Report the amount of your deduction on line 17 of Schedule A. It is important to note that you can only claim a deduction for your car donation if you itemize, the sum of all your eligible expenses on Schedule A should go over the standard deduction amount of your filing status.
Other Forms Necessary
You also need to complete Form 8283 if the car donation is greater than $500. If the deduction is between $501 and $5000, completion of Section A is necessary. If the deduction is bigger than $5000, Section B needs to be completed. Also, you have to get a written appraisal as documentation.
Things To Consider
If the church sells the car for $500 or less, then you can deduct $500 or the car’s fair market value, whichever is less. For instance, if the vehicle is valued at $650 but is only sold for $350, then the deduction is $500. Also, most charities will also report the sales price of the car to you on Form 1098-C. It is vital that you have proper documentation of your donated junk car from the church. This must include your name, the VIN or vehicle identification number and a statement describing the goods and services you received if any.