Tax Deduction Limit - Car Donation And The Gross Earnings

Document Sample
Tax Deduction Limit - Car Donation And The Gross Earnings Powered By Docstoc
					Tax Deduction Limit - Car Donation And The Gross Earnings

Before 2005, there was no such thing as the "gross proceeds tax deduction limit" when
someone would donate a vehicle to charity and use it as an IRS tax deduction. People had
always cited the tax deduction as a reason to donate a used automobile rather than market it.
The gross proceeds limit has become somewhat of a spoiler to those people who were donating
vehicles just for the tax deduction alone! The great news is that conquering the gross proceeds
hurdle is not necessarily an obstacle that will not be conquer. The bad news is the fact that
getting past the gross proceeds rule requires documentation.

In fact, there's a lot paper work involved that you will most likely have to keep this article
bookmarked as a reference tool.Before we begin, let's explain how the gross proceeds tax
deduction limit operates. Due to the gross proceeds rule, whenever you donate a car, you will
be able to deduct no more than the amount the donated car earned at the charity's auction - or
$500 - whichever amount is less.The usual amount that a donated automobile pulls in at auction
is in between $200 and $500. But, until recently, whenever a donated car sold for more than
$500 at auction, we had the ability to declare the full amount as a tax deduction. Now, our
deduction could be no more than $500, no matter the amount the donated car went for at
auction.However, like any rule, you will find exceptions to this one too.

Scenario #1: You've donated your car to a charity that plans to use it themselves to carry out
specific tasks or services. For example, you donate your used automobile, one that is in
respectable condition, with decent mileage, to a neighborhood elderly care center. You could
have sold it and profited but you are aware that the organization needs a vehicle to deliver hot
lunches to seniors who are confined to their home and unable to navigate life very well on their
own. With elderly grandparents of your own, you just want to do something good hearted.In this
case, you may really be qualified to claim the full worth of the car as a tax deduction. It requires
a letter from the charity that you donated your car to. This letter must state the receiving charity
will be using the vehicle for a particular objective. Their use of the vehicle should be thoroughly

Scenario #2: The charity organization would really like to give your donated car to a guy in need
of a car to visit daily with his ailing spouse at a care home. The charity needs to write a
statement or letter completely explaining that the donated automobile is going to a person in

Situation #3: The charity donation getting your donated car feels the need to make material
improvements to the vehicle. Material enhancement is best defined as correcting anything that
seriously compromises use of the vehicle and makes it unsafe. For example, the replacement of
a severely cracked windshield falls under this class. It is harm that could impair visibility,
possibly harming the operator of the vehicle, any passengers and anybody sharing a road with
them.In this situation, the charity organization should clearly clarify what enhancements the
donated car needs and why they're imperative. They should also promise to not sell the vehicle
until these enhancements are complete.

Getting good information on car donation these days is not so easy. Good thing I found this
great website right here: Car for charity

Shared By:
Description: Car Donation, Donate A Car, Car Donation Form, Vehicle Donation Program, Car Donation Information