When donating a car to charity, search out a particular charity to give it to, like Kars for Kids. The most important step toward choosing a charity is to make sure it is a 301(c) filing nonprofit organization. To do this, a person needs to itemize tax deductions on their return. The deductions cannot be more than half of the adjusted gross income and the vehicle must be a car, truck, boat or aircraft.
There are several things to consider when figuring the amount that can be deducted for a vehicle, such as, the car must be privately owned. In most cases, fair market value can be the deduction amount, unless the car is worth more than $500. In that case the person would do well to consult with a tax professional to make sure the deduction is taken correctly.
To itemize the charitable contribution the person must file a Schedule A with the return. This form has specific directions in the booklet for 1040A filers, and an easy worksheet included in the booklet will take the person step-by-step through the form to fill it out correctly. The worksheet will require:
- Step 1: list the qualifying conservation contributions.
- Step 2: list the car and any other applicable contributions and do the math described in each part (50% limit, etc.).
- Step 3: figure one half of the year’s adjusted gross income.
- Go through all the questions in Step 3 and fill in the blanks. At the end it will require the person to add and subtract the amounts and it tells the user which amounts to list on Schedule A and on which line.
Follow the directions on the Schedule A form and enter the figured amounts on the form 1040A.
Make sure you choose the correct nonprofit organization to donate to, follow the easy step-by-step directions for form 1040A and Schedule A, do the math and put the figures in the right spaces. That’s it!