Finance Tax Time

Most people look forward to getting their tax return, but one of the downsides to filing taxes is that you may find yourself owing the taxman come April 15. What do you do when you realize that you not only owe money, but you owe more than you can pay at the time?

The answer is: charitable deductions.

Did you know that charitable contributions are deductible from your taxes? Most people only think of donations as being cash, and giving away more cash that you don’t have won’t help you in this case. However, there is another option available - donate your car. Do you have an old car sitting around (even if it doesn’t run) that you’re not using or are having a hard time selling? If so, you’re in luck! Many charities accept car donations, regardless of condition, and this contribution can be deducted from your taxes. There are a few steps you need to take in order to claim a deduction by way of car or other vehicle donation:

First thing you need to do is find out how much value you can get out of the car or other vehicle you plan to donate. Even old cars in poor condition are often accepted for donation, as they can still be sold for parts or scrap. There are sites that specialize in this kind of information, many of them free.

Find a charity or non-profit organization you believe in. It is one thing to donate a car simply for the tax relief, but find a charity that you feel strongly about to donate your car to. You won’t only be helping yourself, you will be helping others that you care about.

Thirdly, make your donation - making sure that it is tax deductible. In most cases this will be the full value of the vehicle (actual market value, not Blue Book), but state laws may vary for state income tax purposes. If you have any question about this, you should see your tax advisor.

To prevent over-estimate, the IRS requires people who donate their car to produce a document from the charitable organization specifying the resale price of the car after the car is sold off. Automobiles with retail values up to $500 are exempt from this rule. In any case, make sure you get a receipt detailing your car donation. Requesting a receipt may also be necessary if you have your taxes prepared by a paid preparer.

Donating a car may sound like a big undertaking, but it’s not. You can accomplish three things at once - getting rid of an old car that is taking up valuable space, helping your favorite charity, and getting a deduction on your income taxes. If you have an old car and want to reduce your tax payment, donating a car might be right for you!

For more information on car donation, please visit
Car Donation For Charity and Tax Relief.

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Americans contributed $248 billion to charity last year.

As your wealth grows and the tax burden increases, you have probably thought about how making a charitable donation could best be used to benefit others and yourself. Charitable trusts can help you increase the value of your donation by reducing your costs in capital gains, income, and estate taxes.

Charitable Remainder Trusts

A charitable remainder trust (CRT) is an irrevocable trust whose beneficiary is a charitable organization. Throughout the donor’s lifetime, they receive regular payments (fixed or variable) from the trust. When the donor dies, the charity receives any remaining principal.

Assets donated to a CRT are not subject to capital gains taxes and will not be included in the donor’s taxable estate. In addition, the donor may take an income tax deduction on the value of the assets during the year in which the trust is created.

Charitable Lead Trusts

A charitable lead trust (CLT) is nearly the opposite of a CRT. With a CLT, the charity receives regular income generated by the trust throughout the donor’s lifetime. When the donor dies, their heirs will receive the assets in the trust.

Pooled Income Funds

A pooled income fund is an irrevocable trust to which several donors may contribute. Funds are administered by a charitable organization and pay donors regular income for the remainder of their life. When a donor dies, his or her contribution to the fund becomes the property of the charity. Donors are not subject to capital gains taxes and can reduce their current taxable income and estate.

The holiday season is the time of year many people are inclined to help others and improve their tax situations. If the season kindles your desire to give, consider how charitable trusts can help both you and the recipient make the most of your donation.

Always consult with your tax professional for specific information pertaining to your situation.

Roger Sorensen

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