Irene and Dennis Moore have donated two minivans and an SUV to the Red Cross vehicle donation program. They say it’s a great alternative to trading in their vehicles at used lots or running classified ads.
The charity may keep your car, sell it to the public, or use it in its charitable programs. If the program sells the car, you can claim its fair market value on your itemized tax return.
Donating a Car to Charity
When you donate a car to charity, you get the benefit of a tax deduction. This can be a significant benefit if you itemize your taxes. However, you need to make sure that you are donating to a qualified charity before handing over your old vehicle.
Many charities now accept vehicle donations. You can find a list of qualified charities on the IRS website. You should also familiarize yourself with the rules governing non-cash donations. These include ensuring that the charity is a registered 501(c)(3) nonprofit organization and that you have a clear title to the vehicle.
If you don’t have a clear title, your donation won’t be tax deductible. You can still donate your car to charity, but you will need to sign over the title to a third party who will sell it on behalf of the charity. You can then claim a charitable donation based on the auction sale gavel price.
You should always get a written receipt right away after handing your vehicle over to a charity. Depending on the charity and what they do with the car, you may also receive a Form 1098-C or a statement containing similar information. You should keep this document with your tax files until you file your taxes. This will give you a record of the donation and allow you to claim it on your taxes.
Determining the Value of Your Donation
When you donate a car, the IRS lets you claim fair market value as your tax deduction. Our team works hard to get the highest return on your donation by maximizing the value of each vehicle at local wholesale auctions. Our experts will take into account your vehicle’s age, condition, mileage, and options when determining its value. Our goal is to have the charity of your choice benefit from your generosity in the most effective way possible.
The charity may choose to keep your car, sell it at a discounted price to needy individuals, or use it for its charitable activities. The written acknowledgment that the charity gives you must state how it plans to use your car.
If the charity decides to sell your car, it must also tell you how much of the proceeds will benefit the charity and what percentage will be used for fundraising and overhead costs. You must know this in order to make a informed decision about the charity you are donating to.
Before you donate your vehicle, it is a good idea to consult with a tax professional to ensure that you are making the right decision for your situation. You may be able to claim the full fair market value of your car when you file your taxes, but only if you follow these steps and make sure that your charity is a legitimate organization.
Determining the Tax Deduction
If you decide to donate a car to charity, you can generally claim the greater of the fair market value or $500. To determine the fair market value, many donors use a dealer guide or blue book as a starting point. However, donors are also encouraged to keep detailed records of their vehicle’s condition and maintenance and to research similar vehicles on the internet or in the newspaper.
The tax deduction for a donated vehicle is only available if you itemize your deductions on your federal income tax return. In order to itemize, the total of your eligible deductions must exceed the standard deduction amount for your filing status.
When you donate a vehicle, the charity will usually give you a written receipt right after the vehicle is picked up. If the charity later sells the vehicle, it must send you a Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, within 30 days of the sale stating the gross proceeds from the sale.
Some charities will choose to use the donated cars for their own purposes, while others will sell them or put them into a junkyard. In either case, the charity is required to send you a tax-deductible receipt containing the sales price of your donation. In addition, you may also need to fill out IRS Form 8283 and submit it along with your tax return.
Getting a Tax Deduction for Your Donation
There are a number of benefits to donating a car. One is the sense of satisfaction that comes with knowing you are helping others in some way. Another is the ease of doing it. Large charities that regularly accept cars — and services that act as a broker for people who want to donate vehicles — may have staff that can help with the paperwork involved.
Donors should make sure the charity has the vehicle title. If it does not, the donor must get a duplicate before donating the car to the charity. A donor must also take steps to release liability for the vehicle, which may include surrendering the license plates or cancelling the registration. In addition, the charity must notify the state that it is now in possession of the vehicle and must follow any required procedures for doing so, such as submitting a report or notice of sale.
Donors who want to claim a tax deduction should ask the charity or fundraiser how much of the gross proceeds from the sale will go toward overhead and fundraising expenses. The charity must provide this information in the written acknowledgment or IRS Form 1098-C it sends to the donor after the sale. If the charity is selling a donated vehicle for $500 or more, the charity must also complete Section B of Form 8283 and submit it with the donor’s tax return.