Donating A Car In Michigan – What You Need To Know
Deciding to donate your vehicle may sound like a great way get a sizable tax deduction, but there are a lot of issues to consider. Donating a car in Michigan is relatively straight forward, but you still need to do your research. Do not let the idea of endless red tape scare you away from donating to a charity, however, as many are perfectly reputable and easy to handle.
Vehicle Donations in Michigan
There are three different organization models that handle vehicle donations in Michigan. First, there are charities that run their own donation program. These groups keep all of the benefits from your car and apply them directly to their mission. The second model is run by a contracted company. In this instance, the charity will hire an outside source to handle the donation process.
The fees for this service will be deducted from any money earned by your car. The final model is a bit shady, but happens quite frequently. With this model, the charity gives permission to a professional fundraiser to use their name for marketing purposes. This leads the donator to believe that all proceeds from the car will benefit the charity. In actuality, the proceeds are completely kept by the fundraiser.
Once you have decided on a charity to use and feel comfortable about the donation process, you will need to handle the accounting aspect. If the charity is designated as a “qualified organization” per the IRS standards, you may be able to deduct the cost from your taxes. The amount you can deduct will depend on if the amount is over $500, the amount of the proceeds from the sale, and the market value of the car. You will need to contact an accountant to find out the exact amount of your donation.
You may also receive a state tax credit for your donation. If the charity is listed by the Michigan Department of Treasury as a qualifying organization, then you could possibly get up to a $50 credit for singles or $100 for joint filers. Discuss this option with your account to ensure that you are using the correct forms.
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