Donating a car to charity? You might want to pump the brakes
- Donating a car could be one of the least cost-effective ways to aid a charity, says an industry expert.
- The car-donation industry is riddled with fraud and deception, with multiple states investigating outfits for false advertising and self-dealing.
- These eight tips can help donors protect themselves while trying to help others out.
Tax Benefits of Donating a Car
Donating a Car for a Tax Credit van or another vehicle to charity is perhaps the largest single charitable contribution you may make in your lifetime. Your motivation may be an act of convenience or benevolence, either way, it’s important to be assured that you could obtain the maximum tax deduction allowed.
Donating a Car for Tax Credit
The tax law that took effect back in January of 2005 has helped make things less confusing. Because of the IRS, car donation is now less complicated in determining the value of your car. Before 2005, tax benefits of donating a car were based on inflated book values, which tend to get less reliable as the car becomes older. With this new law, the amount you can deduct for your vehicle donation is precisely related to the amount it sells for.
- We make it simple to get the maximum tax benefits of donating a car. Call us or fill out our easy online form and we take care of everything else.
- Your car is professionally towed at no expense to you and then sold at auction.
- The proceeds from the sale benefit the charity you have chosen and you will receive a receipt for your tax purposes.
IRS Car Donation Rules to be Aware of
For a car donation to be eligible for a tax benefit, the vehicle must be donated to a tax-exempt nonprofit organization that falls under IRS section 501(c)(3) which can receive tax-deductible donations. At Donate A Car, we have already done the work for you in providing a large list of trusted charities that meet this requirement. You can rest assured that whichever nonprofit organization you choose on our site to benefit from your car donation, they are allowed to receive tax-deductible donations.
After your donated car is sold at auction, you will receive an IRS Tax Form 1098-C in the mail providing the amount you are allowed to deduct from your taxes.
- If your donated car sells for under $500, you are allowed to claim the fair market value of your car up to $500.
- If your donated cars sell for more than $500, you are allowed to claim the precise dollar amount that your car was sold for. We will provide you with a completed IRS Tax Form 1098-C with your donated vehicle’s sales amount within 30 days after the sale.
- If your donated car sells for over $5000, you’ll also need IRS Tax Form 8283. When filing taxes, you will need to fill out IRS Form 8283 Section B which must include the signature of an authorized officer of the charity.
IRS Publication 4303
When a donated car sells for more than $500, the precise amount it sold for will be reported on the receipt that is mailed to you. This is the amount of your vehicle donation tax deduction. If your donated vehicle sells for less than $500, you can claim the fair market value (FMV) of your car up to $500.
What is Fair Market Value
Fair Market Value is the price you would reasonably expect to get for your car when selling it on the open market. The FMV of a vehicle is not generally the same as the “blue book” value since elements like excessive wear on the car’s body or engine trouble would lessen the car’s value and notable improvements or upgrades would increase its value. Determining the FMV of a car is based on the vehicle’s year, make, model, mileage, and condition. The mechanical history of your car can also affect its FMV. A great resource to accurately determine the FMV of your car is Kelley Blue Book.
Paperwork Needed When Filing for a Tax Deduction
For a tax deduction of $500 or less, the IRS will need:
- The name of the charity, information about your donated vehicle, and information if any goods or services were received and what their value was.
- This information is typically found on the receipt that will be sent to you.
For a tax deduction of more than $500 to less than $5000, the IRS will need:
- The name of the charity, information about your donated vehicle, and information if any goods or services were received and what their value was
- Form 1098-C Copy B –OR- a legal substitute
- if you are filing online – form 8453.
For a tax deduction of more than $5000, the IRS will need:
- IRS Form 8283 signed by an official of the charity
- Form 1098-C or a legal substitute like the receipt from the charity
You can claim your tax deduction in the year that you donated your car. Be sure to include all the documentation needed as shown above with your federal income tax return. To find out if your car donation qualifies for a state tax deduction, check with your state’s tax department.
[ Donate Car for Tax Credit]
Car Donation Tax Benefit Helpful Links
IRS Publication 526 – Charitable Contributions PDF
IRS Publication 561 – Determining the Value of Donated Property PDF
IRS Form 8283 – Noncash Charitable Contributions PDF
IRS For 8283 – Instructions PDS
IRS Publication 4303 – A Donor’s Guide to Vehicle Donation
IRS Form 1098-C – Instructions
This guide is a general source of useful information and is not intended to replace professional tax advice. Donate A Car’s services do not include accounting, legal, or tax advice. If that is needed, we suggest you seek out the services of a trusted professional in that industry.