Special Regulations Concerning Charity Car Donations and Business Reducing Fleet Overhead

Individuals aren’t the only ones who can reap the potentially manifold benefits of taking a valuable tax cut after participating in a charity car donation program. Businesses that operate a legitimate fleet operation can get rid of unwanted, older and high mileage vehicles and be in a good postion to reap the highest possible “fair value” deduction that is allowed under current charity car donation rules. Of course, since this is a business return we’re talking about, there are special rules that accompany such a charitable contribution.

For starters, a business that runs (and presumably maintains a fleet) is in a position to donate time and labour to a Auto Donation program – not just used vehicles. Valuing such service on your tax returns is tricky at best and is best handled by a CPA. You should keep strict records of all interactions with the charity. Car donation can be part of a total charitable package that can help greatly with end of year tax evaluation, especially if the business is teetering on the edge of a higher tax bracket.

Also, the so-called “50% rule” that applies to private individuals, limiting their allowable deductions to less than 50% of their taxable income, differs for businesses. Generally, 30% is a reasonable self-imposed limit that will keep the auditors at bay.

How deductions are taken from your return also varies quite a bit by the the type of business you’re registered as and whether you file quarterly or annually. Again, talking to your accountant about the possibility of taking a donation rather than selling fleet vehicles on the open market is usually a stop-gap solution to a higher than usual tax burden as calculated for quarterly returns.

To make such a deduction claim from your legitimate charity car donations, be sure to take good pictures of the donated cars, just in case it ever comes to an audit. If you’re prepared, you have a good chance of fighting such intrusions off without problem as long as you have the correct documentation.

Be sure to save every single receipt you receive from a charity car donation organization, no matter who is running it. Often you’ll get one receipt from the actual transfer of title, and then in the next month or so, either a bill of sale or a record indicating what ultimate use your charity car donation was put to. Again, it’s always best to keep your business accountant fully versed as to what you plan to do with fleet automobiles, but donation may actually take a bit of hassle out of what can be a tedious prospect of dealing with many potential buyers.