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Car Donation Tax Deduction Helps You To Reduce Taxes

05.24.2009 · Posted in Finance Articles

Giving away your car to a charitable organization is one way you can get tax deductions from your income. It has become a popular way of getting tax deductions for most individuals and companies. In America, the process regarding taxation usually involves the following; an individual earns a certain amount of money in a year which is usually referred to as the “gross income”. The IRS determines how much money will be deducted from your “gross income”. The amount that remains is the taxable income. This is what is taxed at a percentage that they decide based on the income range. The more income that you earn, more tax that you are required to pay.nnTax payers can deduct certain things to reduce their taxable income. The main deductions are standard deduction and itemized deduction. In the standard deduction the deductions are predetermined for you by the IRS. Your total deduction will have to be more than the standard deduction for you to qualify for a tax deduction.nnHere are some of the most important and best charity donation tips you’ll consider before donating your vehicle whether it’s a car, truck or van.nn1. The car donation tax reduction has been limited to the amount that the charity will eventually sell the car for. This is according to the new rules that have been set up.nn2. A letter of determination from the Internal Revenue Service is important to make certain of the eligibility of the charity you choose as a recipient for the car.nn3. Make sure that you are given an authentic receipt by the charity that receives the car.nn4. Ensure that you know the exact value of the car and have documents stating its value to avoid any suspicions regarding your income tax returns as there will be a lot of scrutiny from the IRS when it comes to non-cash donations.nn5. If the value placed to the charity is over 5000 dollars on the contribution, then you need to ask the charity to provide or direct you to an independent professional appraiser to help in the evaluation of your car.nn6. It important to note that it is not that the charitable organization is under no obligation to come up with the accurate value and you’ll have to pay any fine if the IRS reviews or challenges you and finds that your figures are unsubstantiated.nnA tax deduction checklist should be followed strictly before any tax deduction is done. This is done to make sure that you are tax- aware throughout the year. The checklist acts as a guideline to help you make all the necessary provisions before deducting.

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