Donate cars to California charities and receive tax deduction.

on 10/31/2014 - 06:20 pm

One of the best ways to help others and gain something for yourself in California is to donate your old car to a local charity, because with the government car donation scheme, you can claim a tax deduction for the value of the car.

It is incredibly easy to do, and starts with finding the right charity, one that is qualified for the scheme and recognized by the IRS. Once you have found a charity that represents an issue or people you want to help that fits the scheme criteria, you can then enquire about their car donation scheme.

What happens next depends on the value of the vehicle involved. For vehicles that fall below $500 in value, once the charity has taken the vehicle and sold it, you fill in simple form and can claim fair market value up to the amount it sold for, and not only did you get rid of that old car easily, you help others and get a tax deduction as well. It is rare everyone is a winner but this is one of those cases.

If your vehicle is worth more than $500, things are a little more complicated, but not overly so. Once the car is sold, the charity will send you a notification in the mail, which will include all the required details including the exact amount it was sold for. This information is needed to fill in the IRS form, however the good news is that the deduction will be for the exact amount the vehicle has been sold for. Again, you help others and get a deduction, no downside.

There are a couple of things to understand about this scheme though, as it can end up being something different to what potential donors imagined. Primarily this relates to the deduction and the amount of tax payment being saved.  The most common misunderstanding is that the deduction itself is not the amount of tax you do not have to pay. The deduction is taken off your total earnings before your tax due is calculated. So if you donate a vehicle worth $1000, and you fall into the 28% tax bracket, you will see a reduction in your tax bill of $280. This is still a worthwhile thing, however it can be disappointing for those that do not fully realize how it works, so is worth bearing in mind if you are looking to take part in this worthwhile cause.

The other aspect of car donation that must be done is to remove your registration sticker from the car, and ensure that the charity name is put on the transferred title at pick up, to prevent you being liable for anything that subsequently happens with the car. There have been instances where failure to do this has seen donors getting summonses for violations incurred by a new owner, and this can be difficult to deal with, much easier to ensure it does not happen in the first place.

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