I'm always seeing or hearing about people donating their extra car for tax credit. Are there charities which choose to reward these vehicles to low income families or single mothers etc? It seems to make since to me, someone who has a hard time with transportation is going to have difficulties with establishing employment.

 

Yes there are! Car Donation in New York This is a great organization I suggest you look them up and then they will direct you to one in your area.

 

Yes I know a well known organization who can help you in such good direction.

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Even if, by some miracle, you could deduct $1000 for that car that you just bought for $500, you would still lose money on the deal. Why? Because a tax deduction is not "deducted" from the amount of tax that you owe (that is what a "tax credit" is). Rather, a deduction is deducted from your income, before the amount of tax is calculated. The actual cash value to you of a deduction is the deduction multiplied by your tax bracket. For example, let's say that you are in the 25% tax bracket (for a single person, that would mean taxable income after all of your deductions and exemptions between $31,851 and $77,100; for a married couple filing jointly, taxable income between $63,701 and $128,500). A $1000 deduction only lowers your federal tax bill by $250. So you would wind up $250 in the hole after paying $500 for the car. Even if you are in a state with a high state income tax rate of 10%, you would still be in the whole $150. Your combined federal and state tax rate would have to exceed 50% for your example to save you any money at all, which is pretty much impossible since the top federal rate is 35% (for income exceeding $349,701), and I don't think any state's top rate is 15%.


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