Noel asked: How will it work next year when I file my taxes? I understand that the donation company will give me a voucher for 500 first then if they sell it for more they will forward the difference in a reciept form. So I hand this over to my tax preparer? Then what?
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Then if you are eligible to itemize your deductions (which in most cases happens when the taxpayer owns their home because of mortgage interest and property taxes), you will get a tax deduction for the donation. Your tax bill will be a little smaller as a result.
For example, someone who itemizes deductions, while in the15% tax bracket, saves $75 by writing off a $500 donation.
From an economic standpoint, you are always better off selling the car.
Actually if they sell the car for $200, they send you (and the IRS) a form 1098-C and that’s all you get to deduct.
I did that once and found out it did nothing to my taxes since you must have around 6000 dolars in donations in order for it to make a dent in the taxes you pay.
it’s only going to do good for you if you itemize you deductions instead of taking the standard deduction for your filing status.
if your standard is higher han your itemized you want to take that instead…if you have a professional doing your taxes they can explain it to you!!
contact me if you need more help.
If you itemize, you can include the receipt as a charitable deduction. If the car is in bad shape they probably won’t be able to sell it for more than $500. If you are in a 10% bracket that would save you $50 off your taxes. If you don’t have enough other deductions to itemize, the contribution doesn’t give you any tax benefit.