It’s easy to donate a car in Milwaukee to charity if all you want to do is get rid of it. Simply call a charity that accepts old vehicles, and it will tow your heap away. If you want to maximize the benefits for both the charity and yourself, however, it’s more complicated. Until 2005, it was easy for taxpayers to deduct the entire “fair market value” of a donated vehicle from their taxable income, reducing the taxes they’d have to pay to the Internal Revenue Service. (The IRS defines fair market value as “the price a willing buyer would pay and a willing seller would accept for the vehicle, when neither party is compelled to buy or sell and both parties have reasonable knowledge of the relevant facts.”)
Allowing taxpayers to deduct the full fair market value for all those donated vehicles cost the IRS a lot of dollars, so the agency tightened the rules. Today, you can only deduct a vehicle’s fair market value under very specific conditions. Also note that if your state or locality also levies income taxes, other rules may also apply. These conditions take in many different aspects to consider before you donate a car in Milwaukee.
First, if you want to claim fair market value for your car donation to reduce your federal income taxes, you must itemize deductions. If you’ve always filed 1040EZ tax returns and you plan to keep filing them, you won’t be able to deduct any amount for the car donation. You can file a regular 1040 tax form and itemize, even if the donated auto is your only deduction. That’s usually not the best choice, however, unless you like paying a lot more taxes to the IRS than you must. Here’s the math: Suppose you are in the 28 percent tax bracket. Your donated car’s value, and thus the deduction, is $1,000, so the $1,000 deduction will save you $280. If you’re in the 15 percent tax bracket and you donate a car worth $1,000, it will only reduce your taxes by $150.
Your city councilman’s campaign organization and your hobby club may be nonprofit organizations, but donating a car to them won’t give you any tax benefits. Only “qualified” charities can provide those for you. A qualified charity is one that has been approved by the IRS as an “exempt-status” or 501(c)(3) organization. Most organizations will state in their advertising or receipts that they’re a 501(c)(3). Religious organizations are a special case. They do count as qualified organizations, but they aren’t required to file for 501(c)(3) status. To help you determine whether a charity is qualified to donate a car in Milwaukee to, visit the IRS’s exempt organizations site.
The next important issue is determining the fair market value. The IRS defines fair market value as the price a willing buyer would pay and a willing seller would accept for the vehicle, when neither party is compelled to buy or sell and both parties have reasonable knowledge of the relevant facts. Neither the buyer nor the seller can be an auto dealer. Both must be private parties. IRS Publication 4303 explains this in more detail: “If you use a vehicle pricing guide to determine fair market value, be sure that the sales price listed is for a vehicle that is the same make, model and year, sold in the same condition, and with the same or substantially similar options or accessories as your vehicle.”
Before you donate a car in Milwaukee to charity make sure you know exactly what you are doing. For more information about donating a vehicle go to http://www.rawhide.org/home/donations/donate-car-milwaukee/.