How to Turn Your Old Beat-Up Car Into a Car Donation Tax Deduction
If you're thinking about donating a car to a charity you may want to
keep the following tips in mind. A car donation tax deduction can
benefit not only you and the charity but a person in need also.
Charities have the option of using donated vehicles for their own use,
for providing transportation for volunteers or for charity-related
activities such as picking up supplies etc. But more often they will
already have enough vehicles and they will sell the auto, truck, RV,
airplane or other vehicle from their car lot or through dealers to raise
funds for their charity. If the charity uses a dealer they've
contracted with, the charity may only receive $50 or less from the
dealer when the vehicle is sold.
Changes in the laws limit the amount the donor can receive for a used
car donation to the actual price that the charity sells the car or truck
for.
If the charity or car donation program is not familiar to you, you may
want to make sure the charity is eligible from the IRS to receive tax
deductible contributions. Request a copy of the charity's letter of
determination from the IRS. This letter verifies the charity's tax
exempt status.
Make sure that the charity or car donation center gives you an itemized
detailed receipt for your car donation. Keep it in a safe place and file
it with your tax return. Non-cash donations can be an unwanted red flag
for an IRS audit so make sure you document the value of the car and
keep good detailed records.
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If you discover that your old used car is worth more than $500 then you
as the donor must fill out Section A of the IRS Form 8283 and file it
with your income tax return. Make sure you get a written acknowledgement
along with the receipt from the charity because you'll be required to
do so.
If the charity turns around and sells the car instead of using it for
transportation then the charity must give the donor certification that
the car was sold at what is called "arms length" between parties who are
unrelated. And after the sale report the sale price of the car to you
within at least 30 days. The donor's car donation tax deduction will be
only for the amount that the charity sold your car for. And if the
charity doesn't sell the car and elects to keep it, then it must give
you, the donor, a written receipt for the vehicle within 30 days of the
date of the sale.
The charitable car donation organization might also be required to
provide certification to the donor showing how it plans to make use of
or improve or repair the car or other vehicle and also that it promises
it won't sell or transfer the car to another person or company.
In the US, the federal government imposes penalties on charities that
provide fraudulent acknowledgments or documentation to donors.
If the car, truck or vehicle you plan to donate is worth $5,000 or more,
then an independent appraisal is required and you must fill out Section
B of IRS Form 8283. You ma have to get advice from your CPA or
accountant on how to handle this.
If you think or know your car or truck or other vehicle is worth less
than $5,000, you can use the Kelley Blue Book or a little guide book
from the National Auto Dealers Association (NADA) to figure out the
market value. You can find these guides online or at your local public
library. You must use the correct figures for the mileage, date and
exact condition of your car - document this as much as possible.
Choosing the highest figure listed in the guide for your car model and
year without taking into consideration any of the other options and
factors will not make the IRS very happy.
Take several current pictures of the car or truck and save all your
vehicle receipts for new tires, repair work, or any necessary upgrades
to help prove its value.
It's important to remember, that you as the donor, not the charitable
organization, are responsible for determining the value the car. It is
you who will pay any penalties if the IRS challenges your figures
through an audit.
There are many reputable lesser-known as well as the more well-known
charities such as Target, Purple Heart, Kidney Foundation, Salvation
Army and Goodwill Industries. Centers are located in every state
including Massachusetts, California, Minnesota, New York, New Jersey,
Michigan, Illinois, Connecticut etc. Some of the charities in some
states seem more active in pursuing the donations than others and you'll
find more ads.
These are just a few of the best tips you should know about if you plan
on donating a car, truck, RV, airplane, boat or other vehicle. Armed
with these facts you can start to make an educated decision about
whether you want to go ahead and donate a vehicle and get a nice car
donation tax deduction.
