Some people may think that donating to charity will no longer be a good option to reduce their income taxes, following the implementation of the Tax Cuts and Jobs Act.
However, some tax experts believe that the new tax law won’t dampen every American’s passion for helping those in need. Charitable donations are expected to drop by $17.2 billion in 2018, but the non-profit sector still expects people to donate even when it doesn’t involve tax incentives.
Lloyd Hitoshi Mayer, a University of Notre Dame law professor, said that many individuals choose to donate when the economy and the stock market is doing well. In both cases, more people have a higher disposable income. Some of them may not even be aware that donating their old car will likely have a positive impact on their income taxes.
If you plan on donating your old vehicle, you should choose a car donation center that is recognized by the Internal Revenue Service as a 501(c)(3) organization to avail of tax incentives. Donating your car doesn’t simply involve handing it over to charity.
Planning a Donation
You should itemize your charitable donations and declare your car as part of them. Knowing your car’s fair market value (FMV) is one way to determine how much you can deduct from your taxable income. However, don’t expect to get the FMV if your car is not in good shape.
Another way involves finding out the charity’s selling price at the time when they sold your car. In case they kept it for their own use, you could then include the FMV as part of your deductible.
The new tax law requires you to review your financial plans on a long-term basis, as the changes will likely be more apparent in the next few years. Those who wish to donate and still take advantage of the tax incentives should consult with an accountant to know their best options.