Have a used car you’re thinking of replacing with a newer model? You can use the car as a trade-in, sell the car or in many cases donate the vehicle and receive a tax deduction. A number of national, state and local charities will be happy to accept your vehicle regardless of condition. They may use the vehicle for their charity, donate to a worthy individual in keeping with their mission or sell the car or truck and use the funds within their organization.
CBS News MoneyWatch provides some insights to donating your vehicle. Since the actual fair market value is often higher than the price the charity realizes from sales of a car, most people claim the fair market value as their charitable deduction as allowed by law. There are the four specific rules and conditions the IRS allows for you to claim the maximum fair market value deduction of a donated car:
- When a charity auctions a vehicle for less than $500 you may still make a deduction of up to $500 on your tax filing. This means that if the vehicle sells for $200 and the market valuation was $400, you are able to claim a $400 deduction.
- If the charity keeps the car for use as part of its proclaimed mission instead of selling it you may claim a full deduction for the vehicle using its fair market value. As long as the charity uses the vehicle in accordance with its stated purpose as described in its mission statement, including transportation of employees on charity business, this meets the IRS requirements and the charity will provide you with the applicable deduction form.
- If the charity makes major improvements before selling the car.
- If the charity mission statement provides for the charity helping meet transportation needs and the charity gives or sells the vehicle below fair market value, the IRS allows you a deduction for the entire fair market value.
Fair market value is defined by the IRS as the price an individual non-dealer buyer would be willing to pay for the vehicle and you as seller would be willing to accept. To simply the process and eliminate guesswork the IRS allows you to use vehicle valuation services to determine your car’s fair market value. Use a reasonable comparison including the same year, make, model, options and condition.
An Internet search for a tax deductible car donation lapeer county mi service will give you insight into donating your vehicle to charity in Lapeer County, Michigan. A link to Michigan state will give you additional guidance concerning regulations, benefits and advantages and procedures to follow to complete your donation. Do your research and decide how making a vehicle donation will benefit you as well as others.
A final thing to remember is to be sure the charity is registered with the IRS for 401(c) tax deductible status. Few charities actually handle vehicles themselves opting to utilize auction services who forward funds to them. Research is essential to insure you know the processes used by each charity.