How is your tax return determined
How The Amount Of Your Vehicle Donation is Determined
A vehicle donation can be a great way to get a deduction on your taxes. Thanks to new tax law that went into effect in January 2005, the IRS has simplified the process by taking the guesswork out of determining the value of your vehicle.
As of January 2005, you may deduct the full price we receive for the sale of your vehicle. This greatly simplifies the process for you, the donor, because you no longer have to research and come up with an estimate of the fair market value of the vehicle.
This also eliminates the risk of you getting into trouble by overstating the value of your deduction on your tax return. You’ll know exactly the amount you may deduct, eliminating guesswork. This saves you both time and risk.
The IRS allows you, the taxpayer, to claim a tax deduction of
- a) The value of your vehicle up to $500 or
- b) If we sell the vehicle for more than $500, we will mail you a notification stating the exact amount for which it sold, which is the value you state for your tax purposes.
- c) Fair market value in some cases for certain vehicles. For example, late model cars or vans that end up being used to further the work of our charity OR vehicles on which we make a significant material improvement such as a major repair, before selling it. ( * See more on this option below.)
In any case, you will receive a receipt at the time that your vehicle is picked up.
Assuming that we sell your vehicle for more than $500, we will then mail you a notification stating that value for your tax purposes. So for any vehicle sold for more than $500, the exact amount it is sold for will be stated on your notification mailed to you, which in turn will be your tax deduction.
Please feel free to contact our Car Donation department at Family Care Foundation at 1-800-992-2383 with any questions you may have.
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* Excerpt from IRS publication 4302, A Charity’s Guide to Car Donations :
“If a charity intends to make significant intervening use of or materially improve the car, the donor generally can deduct its fair market value.
“Significant intervening use means that a charity must actually use the car to substantially further its regularly conducted activities, and the use must be considerable. There is no significant intervening use if the charity’s use is incidental or not intended at the time of the contribution.
“Material improvement includes a major repair or improvement that results in a significant increase in the car’s value. Cleaning, minor repairs, and routine maintenance are not material improvements.
“The charity must provide the donor with a contemporaneous written acknowledgement of the donation. Without an acknowledgement, the donor cannot deduct the contribution.”
(end of excerpt from IRS publication 4302, A Charity’s Guide to Car Donations)
Contributions of Property and Fair Market Value:
If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. (From Itemized Deductions/Standard Deductions )
Determining Fair Market Value:
Cars, boats, and aircraft: If you contribute a car, boat, or aircraft to a charitable organization, you must determine its fair market value.
Certain commercial firms and trade organizations publish guides, commonly called "blue books," containing complete dealer sale prices or dealer average prices for recent model years. The guides may be published monthly or seasonally, and for different regions of the country. These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. The prices are not "official" and these publications are not considered an appraisal of any specific donated property. But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area.
Example. You donate your car to a local high school for use by their students studying automobile repair.
Your credit union told you that the "blue book" value of the car is $1,600. However, your car needs extensive repairs and, after some checking, you find that you could sell it for for $750. You can deduct $750, the true fair market value of the car, as a charitable contribution.
Determining the Value of Donated Property:
This publication is designed to help donors and appraisers determine the value of property (other than cash) that is given to qualified organizations. It also explains what kind of information you must have to support the charitable contribution deduction you claim on your return. IRS Publication 561
Excerpt from Kelley Blue Book
If you donate a car to a charitable organization, YOU must determine its fair market value. The fair market value of your vehicle cannot be determined by a charity, the IRS considers that to be a "conflict of interest." Kelley Blue Book can help you determine your vehicle's value.
Start by logging on to http://www.kbb.com .
[Click on: “Used cars ” at top, and select the year. make and exact model of your vehicle, then press “GO ”. Select "Private Party Value ."]
You also need to fill in the exact mileage on the car and the zip code in which you will be stating that you live on your tax return.
To help further define your specific vehicle's value, make sure you accurately select the options on your vehicle. These could include a sunroof, leather interior, power windows and door locks, etc. Check these boxes correctly according to your car and check all that apply.
The bottom box is entitled "Select Vehicle Condition ." Choose "Help Me ," which is the last box on the right. This is important in order to accurately get what the IRS deems as the "fair market value" for your vehicle.
After choosing "Help Me" click on the bottom button called, "Get Pricing Report ."
On this page you rate the following: Exterior Condition, Interior Condition,
Mechanical Condition. and other important factors in rating your vehicles current condition. Choose one rating for each. Do not skip any of these questions. Print this page to show the charity and the IRS that you took the vehicle's current condition into consideration when placing a value on it.
When finished, click on "Get Pricing Report " at the bottom of the page. You will then receive the Kelley Blue Book "Private Party Value" for your car in its current condition. This will be the value you will use for your donated vehicle. You should print a few copies of this page for your tax records, the IRS and for the charity in which you are donating your vehicle. Make sure to take several photos of your vehicle for your files as well.
If the amount of your deduction for all non-cash gifts is more then $500.00 then you must file the IRS Form 8283: Non-cash Charitable Contributions (http://www.irs.gov/pub/irs-pdf/f8283.pdf ) with your itemized tax return. A copy should be mailed to the charity or donation program.
The IRS requires that the charity or donation program verify your donation and file IRS Form 8282: Donee Information Return (www.irs.gov/pub/irs-pdf/f8282.pdf ). You should be sent a copy for your records.
TAX INFORMATION FROM THE IRS
For information about determining the "fair market value" of a vehicle you can read "Publication 526 Charitable Contributions" at http://www.irs.gov/pub/irs-pdf/p526.pdf . You should read the entire publication. Be sure to read the section entitled "Contribution of Property" and a section called "Determining Fair Market Value." Another section called "Cars, boats, and aircraft" will help you in situations of donating these types of properties. Another helpful IRS document is Publication 561, entitled, "Publication 561 Determining the Value of Donated Property," located at: http://www.irs.gov/pub/irs-pdf/p561.pdf
RECORDS YOU MUST OBTAIN FROM THE CHARITABLE ORGANIZATION
When you make any non-cash contributions, you must get and keep a receipt from the charitable organization showing: Name of the charity, date and location of the charitable contribution, and a detailed description of the donation. This receipt also includes the charity's tax identification number for your records.
(End of excerpt from Kelly Blue Book site)