It's becoming increasingly popular for many Americans to donate a car; especially right after buying a new vehicle. Unless the older car is being given to a family member or friend, there are a limited number of options the owner has including trading the vehicle in, selling it, or donating it to a charity such as the Salvation Army.
When buying a new car, there are a couple of ways to dispose of the old one. For example, it's possible to:
Many consumers are starting to shy away from selling their cars themselves. There are several kinds of risks taken when selling a car over the Internet or through the newspaper. One risk has to do with personal safety. There are many thieves and creeps in the world that might seize this opportunity to steal a car and perhaps hurt the owner in the process. The second risk is the car might be damaged by a potential buyer.
The final risk has to do with getting paid for the car. It's important to get paid, meaning cash in the bank, before signing the car's title over to the buyer. Once it's signed, it will be extremely hard to get paid if a personal check bounces or the cashier's check has a typo on it.
At this point, we're going to walk through a process that describes how to donate a used car to charity. Realistically, there are two good reasons to donate a car. The first is that the owner gets a good feeling inside knowing they've helped others that are less fortunate. The second reason comes from a tax break that occurs when donating a car to a charity, not-for-profit, or nonprofit organization.
The Internal Revenue Service sets the rules for how much a taxpayer can claim on their income taxes if they've donated a car. Advertisements on the radio make it sound like it's possible to deduct the full value of the car, which means the one found in a blue book. While a book outlining the value of used cars might be a good starting point, it is not always the value a taxpayer can claim as a deduction.
In fact, the IRS has three rules when it comes to donating a car to charity:
When donating a car to a charity such as the Salvation Army, which has their own process for this type of transaction, make sure the correct paperwork is retained for tax records. At a minimum, this includes name and address of the charity or nonprofit organization.
Taxpayers also need a description of the car (make, model, mileage, and year), the date, and location of the donation. A written acknowledgement for the car's donation such as a receipt or similar document should also be retained. Taking pictures of the car can also help provide a record of the car's condition.
If the car is valued at more than $500, the owner will also need to fill out tax form 8283. If the car is valued at more than $5,000, a written professional appraisal is needed. This must be completed not more than 60 days prior to donating the car to a charity.
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