Utah is well known for its enticing national parks, the Sundance film festival, and is an excellent place for practicing paleontology. Also, the people of Utah are known as one of the most generous people in the United States. They all strive for fundraising initiatives, such as charity, through car donations.
People donate a car in Utah for a variety of noble causes and charitable purposes, including relief to patients who can’t afford costly treatments. It’s not wrong to say that people who offer charity should be entitled to the benefits of these donations.
For instance, one can get the benefits of tax deductions by donating their car to a charitable organization. Utah has many such reputed philanthropic trusts, where one can give cars for various noble causes. These trusts make it possible even for people from rural areas, like Bicknell in Utah, to avail tax deductions from car donations.
This article will go through some of the critical aspects related to tax deductions while donating a car.
Itemize Your Return
It’s necessary to itemize the deductions if you wish to claim your car donation for reducing your taxes.
If the donation is the only deduction, standard deductions are likely to save you more money. You can achieve the benefit to the fullest when you have many deductions, including the car donation claim, and their total exceeds the standard deduction. However, the IRS limits the amount you can claim on your tax returns.
Impact of Tax Bill
One wishing to claim tax benefits from car donations must check the latest Tax bill. The Tax Cuts and Jobs Act lowers the tax rates and alters the income brackets. In Utah, the latest tax reform has enabled higher take-home, increased employee bonuses and incentives, and increased charitable donations.
You must check the applicable income bracket to decide the amount that you’re permitted to claim. The tax benefits from such contributions are perhaps more or less advantageous.
Document Tax Receipts
Maintain a record of all transactions related to the car donation. Furnish these documents at the time filing your taxes. The IRS gives a six-month extension to submit the returns in case of a delay in the car sale.
Otherwise, file the returns without claim. Use 1040X to claim the deductions, once charity sends you sale notification.
Identify a Qualified Charitable Organization
Donate your car to an IRS recognized, qualified 501c3 charity to claim your tax deduction. If you wish to donate cars in Utah, you can search online for genuine charitable organizations. From the list of organizations you select, IRS can confirm which ones are qualified and official.
Significance of Fair Market Value
The fair market value is the price a buyer will pay and a seller will accept. Under the IRS rules, you can deduct the vehicle’s fair market value under specific conditions. One such condition is when you sell your car to an underprivileged person at a rate significantly below fair market value.
To summarize, when you donate a car for charity in Utah, you can undoubtedly gain tax deductions. Keep in mind the aspects mentioned above, before proceeding with the claim.