CAR INSURANCE QUOTES MN

dit, the process is easy. Just pick out a charity that you like and give them your vehicle.

You will only need to provide the title, have the automobile removed from your insurance policy and make sure that it is no longer registered in your name.

On the other hand, if you want to donate your car to get a tax deduction, the process becomes more complicated.

• The charity that receives the car must have an IRS 501(c) (3) designation, meaning that they are “exempt” from taxes.
• You must itemize the deduction on your tax return to receive the credit.
• You must obtain a receipt from the charitable organization.
• If the charity keeps and uses the car, you can typically claim the fair market value (FMV) of the vehicle as a deduction, typically the Kelley Blue Book (KBB) retail value.
• If the charity sells the car at auction, you can deduct the selling price of the car. And if the vehicle sells for less than $500, you can deduct the FMV of the car up to $500.
• A vehicle donation tax deduction is not dollar-for-dollar credit. It is based on your income bracket which determines the percentage that you pay in taxes.

If you are wondering whether you will get more money by trading your car in or donating it and claiming a tax deduction, you have to do the math.

• Consider the actual amount of the deduction. Because the tax deduction won’t be dollar-for-dollar, you have to think about how much you will really save on your taxes. For example, you donate a car that is sold by a charity at auction for $1,500. If you are in the 28% tax bracket, your actual reduction in taxes will amount to $420.
• Remember that itemization has to make sense. If you don’t already itemize your tax return, it probably won’t make sense to do it just for a car donation deduction. Whenever you do your taxes, you should look at what your standard deduction would be. You may find that taking the standard deduction is still better than itemizing your deductions (resulting in a lower taxable income and saving you more money), even after taking the car donation deduction.

For most people, donating a car for the purpose of claiming a tax deduction works out for them if they have an older used car that is worth very little. For example, you have a beat-up car that is nearly falling apart. You know that you would be lucky to get $150 for it at a dealership. But you find a charity that is willing to give you credit for the FMV of the vehicle, which is $2,000. In this case, if you fall into the 28% tax bracket (and your itemized deductions add up to more than the standard deduction), your deduction would be $560 and it would make sense financially to donate the car.