At Boomfish Wealth Group, we work with affluent families to avoid the deeply troubling regrets that often come with having wealth.
Wealthy individuals and families often have the desire to give back but are unsure of how to do so. They want to make a meaningful impact on the causes they care deeply about, but they do not want to reduce the amount they can leave to their family.
Fortunately, there are a number of options to give to charity without reducing your estate. One such way is deducting charitable donations on your tax returns.
A recent article in the Wall Street Journal outlines how to deduct a charitable donation, specifically, a car.
Donating your used car not only has a significant impact on a cherished charity but also has benefits for you. It saves you time and energy trying to sell it, and it can result in a charitable deduction on your tax return.
In order to deduct the donation of your car, the Wall Street Journal reports, you must itemize your deductions.
Typically, you could deduct what the charity receives through the sale of the car, though the car may be worth more. If the car is worth $5000 and the charity sells it for $2000, you could deduct $2000. “The charity is supposed to report that sale-price information to you,” according to the article.
However, there are several exceptions to this rule:
- If the car is worth $500 or less, you can typically deduct fair market value.
- If the charity decides not to sell the car but instead uses it to, say, deliver meals to the needy, you can generally deduct fair market value.
- If the charity tells you, in writing, that it plans to sell it far below market value to a person in need, you can typically deduct fair market value.
Note that you must adhere to all record-keeping rules and that there is a limit to charitable donation deductions.
When making charitable donations, make sure to consult with a specialist to ensure that you do not experience regrets.