You can prefer to donate a car, when it grows old, rather than selling it in the market. One good reason for doing so is that car donation can help you enjoy a significant tax deduction advantage while filing your annual tax return. With this tax advantage, you can plan your budget for the upcoming year in a smooth manner. But, to have all these advantages, it is important for you to make some good preparations while donating your vehicle. Here are some tips to help you in these preparations.
Learn about the Federal Laws
Few years ago, the tax laws for car donation were more liberal and as a result, the vehicle owners were able to save more than $600 millions per years by making car donations. However, the scene changed after 2005, after which limits were raised on tax deductible amounts. Still, one can enjoy the tax benefit of donating cars and other vehicles like boats.
Who Can Help?
A charity organization that holds the status of 501(c)(3) with IRS can help you enjoy the tax deduction advantages through car donation. You can easily find these charitable organizations in the form of churches, temples and other government approved charities. Else, you can take advantage of car donation centers to find one of these charities.
Obtain the Car‘s Market Value
Before you actually donate car to the charitable organization or car donation centre, it is mandatory to obtain the market value of your vehicle.
Filling Different Forms
Another important preparation in this direction is to learn about various forms that you would be required to fill. The brief information about these forms can be learned from the following points:
• Schedule A of Form 1040 is the most important form that one needs to fill while claiming for tax deduction advantage. The information provided in this form will be related to the charity and also, the car donated by you.
• Tax Deduction Claim between $250 and $500 – As per the prevailing tax laws, the car donation tax deduction between $250 and $500 requires one to provide information like charity name, details of the car donated and statement issued by the charity for donation made by you.