Tax Information for Donating a Car
Donating your car to a qualified charity can provide a vehicle or the funds from the sale of your car for an organization and allow you to take an important tax deduction. Beginning in 2005 the IRS tightened the rules for car donations, making it less attractive for donors and more difficult for organizations that rely on these donations. The tax information for donating a car has changed, but you can still take advantage of this worthwhile charitable giving option.
Other People Are Reading
-
Qualifying Charitable Organization
-
In order for you to realize a tax deduction, the charitable organization must be 501(c)(3) tax-exempt with the IRS. You can verify an organization's claim of being tax exempt by visiting the IRS's "Search for Charities" website to confirm that information.
Actual Selling Price
-
Donors should note that current IRS rules only allow for taxpayers to deduct the selling price of their car if that vehicle was donated to a charity for their sale to a third party. Under this arrangement, consumers have no idea what price their car will be sold for. Once the sale has been completed, the charity will issue a statement of sale which the taxpayer must attach to his federal tax return to obtain a deduction.
-
Full Market Value
-
One way donors can get a larger deduction is if the charity uses the donated vehicle for its own purposes. In this case the donated vehicle would become part of the charity's fleet or fixed up and donated directly to someone in need. Under these two arrangements, donors can take the higher full market value for the car. That value can be found by searching the Kelley Blue Book website and entering in data about your car.
Tax Forms
-
Taxpayers need to include Copy B of Form 1098 -- Contributions of Motor Vehicles, Boats, and Airplanes -- with their tax returns. If you are claiming more than $5,000, then you'll need to fill out Section A of Form 8283 -- Noncash Charitable Contributions -- and include that with your tax return. You'll also need to have Section B of that form filled out by a qualified appraiser. For donations of at least $250 and not more than $500, a written acknowledgment from the charity is required.
Considerations
-
Donating a car is practical if you itemize your deductions. The benefit of any deduction may depend on your tax bracket, offering better benefits for some than others. Consult with your accountant to see if donating a vehicle is right for you.
-
References
- Photo Credit car image by Brett Bouwer from Fotolia.com
