As unorthodox as it sounds, some people do donate their cars. Some do it out of goodwill, while others resort to donating because no one will buy their old car. Giving a vehicle away is a big deal, and that’s why it has some tax aspects to it.
Organizations such as Carsformadd.org use car donation services to fund their programs. Most of the transactions are in the hands of IAA, the largest vehicle donation company in the US. They collaborate with various car donation organizations in the country to help them sell donated cars.
While most organizations decide to sell the car as is, some of them refurbish cars then sell it for increased value. Those that require vehicles for their services use the donated cars to deliver meals or just as a mode of transportation.
The IRS expects donees to know the fundamentals of car donation, especially if they want something out of it. Most of them want tax deduction, which is a big relief for anyone. As long as both parties have all the official documents of the transaction, there will be no problem.
Many of those files will come from the organization. They must provide written acknowledgement receiving the vehicle, which must contain specific information about the donated car. After that, certifications are the only thing that needs finalizing.
Firstly, the IRS also permits the donation of boats, planes and motorcycles. Second, one needs to determine if the value of the donated vehicle is in excess of $500. Last, everything has to have some sort of documentation to make it official.
As for the deduction, it’s the lesser of the fair market value of the car at the time of the donation or the gross sale proceeds of the charity. The organization should sell the car without repair and without use from the organization to get the true value.
Some tax aspects of car donation require full discussion for complete understanding. It’s important to get it right the first time because no one wants problems in return to their incredible goodwill. Just remember to do it all with the respective paperwork.