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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.
* *
* * * * * * * * * *
* 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
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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)
How
The Amount Of Your Vehicle Donation is Determined
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