Tax Benefits of Car Donation

If you donate a car to charity and itemize deductions on your income tax return, it may be possible to claim a deduction for your car donation.

In 2005, the IRS changed the laws related to tax deductibility of car donations because of exaggerated deductions based on inflated book values (book values tend to become less reliable as a vehicle ages). Under the new rules, the deductible amount of your vehicle donation is directly related to the selling price of your vehicle.

Donate a car and if it sells for less than $500 you can take a tax deduction equal to the ‘fair market value’ of your donation up to $500. Fair Market Value is loosely explained as the “Blue Book” or “Guide Book” value of your vehicle. See our car donation to charity help links below for Kelley Blue Book, NADA Guides or Edmunds.

The charity you donate a car to is required by IRS to send to the donor a contemporaneous written acknowledgement (receipt) within 30 days of the vehicle sale. This receipt must include the following:

1. The gross selling price of the vehicle (if sold for greater than $500)
2. Year, Make, Model and VIN Information
3. A statement that the vehicle was sold at arm’s length between two unrelated parties
4. And a statement that no goods or services were received in return for your contribution.*

*Keep in mind that companies that promise goods or services in return for your car donation are legally cutting into the amount that you can claim for a tax deduction for your charitable contribution.

TIPS TO MAXIMIZE YOUR CAR DONATION TAX DEDUCTION

Car Donation Wizard wants donors to know that donating a car to charity not only helps the organization fund worthwhile research and activities, but you also may be eligible to claim a tax deduction for your charitable contribution. Here are some car donation tax tips:

1. Make sure the charity is eligible to receive tax deductible contributions. The most common types of qualified organizations are section 501©(3) organizations, such as charitable, educational, or religious organizations. Visit IRS.gov to search for registered charities. Car Donation Wizard only works with esteemed, 501©(3) non-profit organizations.
2. Be sure that you get a receipt from the charity for your car donation. You must obtain a written acknowledgment from the charity if the total deduction you are claiming for a donated car is $250 or more. Car Donation Wizard mails a tax receipt for your records following the sale of your vehicle.
3. The IRS will only allow a deduction for the fair market value of the car. This can be found on the tax receipt mailed to you for your donation.
4. If the car is worth more than $500, the donor must complete Section A of IRS Form 8283 and attach it to their tax return.
5. If the car is worth $5,000 or more, an independent appraisal is necessary. The donor must also fill out Section B of IRS Form 8283. Take pictures of the car and save receipts for new tires or other upgrades to verify its value.
6. Always consult your tax adviser or the IRS for more information about how you can claim charitable deductions. The IRS can answer your tax questions and can provide tax forms, publications, and other reading materials for further assistance. IRS materials are accessible through the Internet at www.irs.gov, through telephone ordering at (800) 829-3676, and at IRS walk-in offices in many areas across the country.

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About Unknown

I am Kelly Miller, Founder of i Net Info and managing editor. I began blogging in 2014 and I graduated from Emory University in Atlanta. The main purpose of this site is to provide readers with Education, Insurance, Law, Loans, Car Donations, Online Money Earnings, Health, Entertinment and News.