If you're thinking of donating your car to charity, you should be aware of a number of things that will affect your donation. Unless you are donating your car to a charity that will be using it directly, for example, your tax deduction for that car may be limited by the amount the charity was able to realize when they sold your car. These tips will help you find the right charity to accept your car donation, as well as inform you about important things you should know before and after you donate your car.
1. Always check the charity's credentials before making a donation. You can only take a tax deduction for goods donated to a charity that is allowed to receive tax-deductible contributions. Ask the charity to provide you with the IRS letter of determination that notes the organization's tax-exempt status.
2. Get a formal receipt from the charity for your car donation. It's easy to get swept up in the moment with the thought of helping children with your donation, but the receipt is vital. It should be on the organization's letterhead-a form letter on their letterhead is acceptable-and state the monetary value of your donation. You'll need the receipt to back up your deduction if your tax return is chosen for an audit.
3. And speaking of audits, non-cash donations, such as car donations, are one of the most likely triggers for an IRS audit. Have your car appraised and keep all records pertaining to your car donation just in case.
4. If you car is worth more than $500, you'll have to fill out Section A of Form 8283 issued by the IRS. You'll have to file that form along with a written acknowledgement from the charity that states the value of your donation.
5. If the charity keeps the car for its own use, it will have to issue a receipt to you within 30 days, as well as a certificate that states how it intends to use and or improve the car. The certificate must also state that the organization promises not to sell or transfer the car within a stated length of time.
6. If the charity sells the car, it must provide you with a receipt stating the sales price within 30 days of your donation, along with a certification that they sold the car at "arms-length" between unrelated parties. In this case, you can only deduct the amount of the sale from your taxes.
7. If your car is worth $5,000 or more, you'll have to get an independent appraisal and fill out Section B of IRS Form 8283.
8. If your car is worth less than $5,000, you can determine the market value from the Kelley Blue Book or another acceptable guide to used car value. Be sure to use accurate evaluation, including the mileage and condition of your car.
9. Document the condition of the car with photos, and save receipts for any upgrades or repairs you made before donating the car.
10. Remember, you're the one responsible for giving the right value of the car on your tax return. If you overstate the value of your car donation in order to get a larger tax deduction, you'll be the one paying a penalty, not the charity.
1. Always check the charity's credentials before making a donation. You can only take a tax deduction for goods donated to a charity that is allowed to receive tax-deductible contributions. Ask the charity to provide you with the IRS letter of determination that notes the organization's tax-exempt status.
2. Get a formal receipt from the charity for your car donation. It's easy to get swept up in the moment with the thought of helping children with your donation, but the receipt is vital. It should be on the organization's letterhead-a form letter on their letterhead is acceptable-and state the monetary value of your donation. You'll need the receipt to back up your deduction if your tax return is chosen for an audit.
3. And speaking of audits, non-cash donations, such as car donations, are one of the most likely triggers for an IRS audit. Have your car appraised and keep all records pertaining to your car donation just in case.
4. If you car is worth more than $500, you'll have to fill out Section A of Form 8283 issued by the IRS. You'll have to file that form along with a written acknowledgement from the charity that states the value of your donation.
5. If the charity keeps the car for its own use, it will have to issue a receipt to you within 30 days, as well as a certificate that states how it intends to use and or improve the car. The certificate must also state that the organization promises not to sell or transfer the car within a stated length of time.
6. If the charity sells the car, it must provide you with a receipt stating the sales price within 30 days of your donation, along with a certification that they sold the car at "arms-length" between unrelated parties. In this case, you can only deduct the amount of the sale from your taxes.
7. If your car is worth $5,000 or more, you'll have to get an independent appraisal and fill out Section B of IRS Form 8283.
8. If your car is worth less than $5,000, you can determine the market value from the Kelley Blue Book or another acceptable guide to used car value. Be sure to use accurate evaluation, including the mileage and condition of your car.
9. Document the condition of the car with photos, and save receipts for any upgrades or repairs you made before donating the car.
10. Remember, you're the one responsible for giving the right value of the car on your tax return. If you overstate the value of your car donation in order to get a larger tax deduction, you'll be the one paying a penalty, not the charity.
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