Important!
From now on our full reviews are going to get another section that’s going to deal with this topic. Since donating cars to charity became really popular practice, we are going to add section in which you will be able to see approximate fair market price of used older models of reviewed vehicles. In this article you can find information on how to donate car to charity and get a tax deduction.
Choosing the Right Charity Organization
- Choose charity organization
-Check is it recognized by the IRS, on this link:
http://www.irs.gov/Charities-&-Non-Profits/Search-for-Charities
Since there are a lot of scamers out there, choosing a right charity organization is not that easy anymore. Accept choosing the charity organization whose causes you generally support, you also need to be sure that the organization you choose is qualified, since only donating car to these organizations will lead to tax deduction. 501(c)(3) organizations are are commonly eligible to do a work like this. This includes charitable, religious and educational organizations. On this link you can check is the organization you chose recognized by the IRS:
http://www.irs.gov/Charities-&-Non-Profits/Search-for-CharitiesAnother
You can also check this by calling Division for Tax Exempt and Government Entities, part of the IRS Account Services, you’ll need to call this number: 877) 829-5500. Call is going to be toll-free.
Tax Deduction Limitations
If you decide to give your car to charity, your tax deduction can’t be bigger than 50% of your gross income. It also can’t be bigger than fair market value of the car you are donating. In some cases this can be smaller than the counted Blue Book value that you can find on used cars web sites, as well as this one.
What’s a Fair Market Value of a Car?
Technically it is the amount of money that a willing buyer is ready to give and a willing seller is ready to receive for the car in question. So this figure might be smaller from the Blue Book value, since online Blue Book calculators don’t dig too deep, unlike possible buyers. If your car need some reparations from the inside or the outside for example that lowers its value for the cost of these and the tax deduction you are going to get for donating a car like that would be a Blue Book value, minus the cost of the reparations.
Records You Need to Keep and Documents You Need to File to Get Tax Deduction
If the value of the car you are donating is higher than $250, you will need to obtain contemporaneous written acknowledgment. This needs to be obtained before the date you write your tax return, and it must contain the name of the organization you are donating your car to, description of the car and some of these three:
– statement that you didn’t get anything in return for your donation
– if you did get something from your donation you’ll need to have a description or an estimate on the value of the things you get in return for donating your car
– if the organizations provided you with religious benefits only, for donating your car, you’ll need their statement that confirms this was the case.
-Form 1040
-Form 8283
– Section A- if the tax deduction you are claiming is higher than $500
– Section B- if the tax deduction you are claiming is higher than $5,000
3. Written appraisal- you’ll need this only if you are claiming tax deduction higher than $5,000. This needs to be written by qualified appraisal in no more than 60 days before donating your car.
So How Big Tax Deduction Do I Get?
If your vehicle is worth $500 or less this is the tax deduction you are going to get.
If your vehicle’s more expensive, your tax deduction depends on the price the charity organization is going to sell your vehicle for. You should contact the charity organization you donated your car to, find out the price they sold it for and than claim that amount.
Charity organization can decide to keep your car and use it for their everyday business. If this happens your tax deduction is going to be the same as the fair market value of the car. Same goes if charity decides to sell the vehicle for a small price to a needy individual, often a person in desperate need for transportation.
Further Reading:
http://www.irs.gov/pub/irs-tege/pub4303.pdf
http://www.irs.gov/publications/p526/
http://www.irs.gov/pub/irs-pdf/p4303.pdf
