Utah is known for many great things like being the home to the first KFC restaurant, the Sundance Institute, and the infamous Jell-O. Apart from that, people in Utah are also known to be among the most giving people. No wonder Utah is the second happiest state in the whole country. The people here are happy because of their cheerful and giving nature.
People here know of many ways to show charity. One of the unique charitable practices here is through a Utah car donation. Through these initiatives, people can donate their cars to support specific causes like saving those who are ill.
Car Donations and Tax Savings
You can get significant tax savings from donating your car to charity if you specify it in your charitable contribution deductions. Then again, if you want to maximize your tax savings from the said donation, a little planning is needed.
The IRS provides two ways of calculating your tax deductions. These calculations will be based on how the recipient organization makes use of the vehicle that you donated. For example, if the charity sells the cars you gave, your tax deduction shall be computed based on the sales price. In other cases, the vehicle’s fair market value is used as bases of the deduction computation.
How do you file for a tax deduction for your car donation?
Here are the steps to follow when filing for a tax deduction on the vehicle that you gave up for donation.
- Know how much the recipient charity sells your donated car.
Once you found out the selling price for the Utah car donation, use this as your deduction amount. If the charity sold your car at a car auction for only $4,000, your tax deduction would also be limited to this amount. Even if the car’s fair market value is higher, the tax deduction amount will be the same as the sales price. Then again, if the organization sold your vehicle to a needy person at a meager price, or if they kept the car, you can ask for the fair market value as a deduction.
- Identify your vehicle’s market value.
If you don’t know about the market value of your car, used-car price guide for calculating your tax deduction. Once the tax deduction is identified, ask for the tax receipt. This will be the basis for your tax deduction claim.
- Claim the tax deduction.
Using the Schedule A form, indicate the deduction amount underline 17 of the said form. Remember that you can only claim a tax deduction if you itemize all your eligible expenses. Given that, make sure that your Schedule A total qualified expenses must be more than your deduction amount.
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- Take note of the additional forms you need to fill-out.
If the equivalent amount of your car donation is beyond $500, use form 8283. If the deduction is within $501 to $5,000, use Section A instead. If the deduction is more than $5,000, you should use Section B. Take note that if you fill-out Section B, you also need to secure a written appraisal as your supplemental documentation.
If you are confused as to what form to fill or how much your tax-deductible should be, you can get in touch with IRS. You can also ask for the help of the organization who received your donation.