Thinking of donating your car to charity? Not only is this a generous act but your charitable effort can also help maximize your tax deductions. Typically, when preparing to buy or lease a new car is the time when most folks consider making charitable donations.
Before you donate your car, we suggest you develop an understanding of the procedure and consider certain points to ensure this charitable effort will benefit you, too.
Navigating Tax Regulations
- Verify the Charity’s Status Make sure the organization you are considering is a qualified charity holding a tax-exempt status approved by the IRS. You can verify that the organization here at www.irs.gov/app/eos or ask the organization for a copy of their tax-exempt status letter.
- Understand How Much You Can Claim A high number of donated vehicles are then sold through auctions. This means that the tax deduction on your car donation will not be based on the fair market value; it will be limited to the proceeds the charity receives from the sale of your donated car through bidding.
You can, however, claim the car’s fair market value if the charity uses the vehicle for business activities or gives it to needy individuals.
- Go Through the IRS Guidelines regarding Car Donations To claim a donation over $500, complete the IRS form 8283 and attach it to your tax return. However, if your donation is worth $5,000 or more, then you will be required to submit a written appraisal.
Be sure to do you research thoroughly before donating your car. Ask your tax accountant any questions that remain, or contact the IRS directly. Another alternative is to sell the car privately and donate part or all of the proceeds to the charity.