Do you have an old car, truck, or boat that you’re ready to get rid of? You might consider donating the vehicle to a charitable organization. Some charities will use donated vehicles for their own operations, while others might resell vehicles to needy individuals who would not otherwise be able to afford to buy transportation. Most commonly, however, these organizations simply sell the vehicles and invest the proceeds in their charitable work. Regardless, in order to claim the donation as a deduction on your tax return, you must fill out Form 1098-C and attach it to your return. This form will include both your name and tax information, and the recipient organization’s name and tax information.
How much will you be able to deduct? You won’t necessarily be able to claim Fair Market Value (FMV). When a charity auctions your vehicle off for $500 or less, you may claim either the FMV or $500—whichever is lower. When the charity intends to make significant use of the vehicle, such as in delivering meals to needy people as part of its mission, you may be able to deduct the full FMV. But many donated vehicles are unable to be used and are sold to an auction house or salvage yard instead. In this instance, the deduction you’re allowed to take will be based on the selling price the charity obtains.
For more on this complex issue, get in touch with Taxation Solutions, Inc. We’re Orlando’s source for quality tax help!