You just bought a new car. Your old car is sitting in the garage. You thought about selling it, but it recently crossed your mind to consider donating it to one of your favorite local charities, instead. You know that it’s an option because every time that you fill out your annual tax return form, you recall one of the questions being if you’ve given anything to charity that year. But when it comes to something as big (literally and financially) as a car, you’re not totally sure what the tax benefits are.
If you want to donate your car, but don’t know how to do it and you’re looking for some additional information on the tax benefits that come with it, keep reading.
What Do I Need to Know Before Making a Donation?
Once you’ve made the decision to donate your car, the Internal Revenue Service does have some recommendations to make your donation go smoothly. First, research the charity to insure that it’s a legitimate one (that the IRS honors it as being one). CharityNavigator.org is a website that’s devoted to providing people with relevant information when it comes to making donations to various organizations. Next, you should verify that you will be able to receive a tax benefit by making a car donation to the charity. Finally, look up the Kelly Blue Book amount of your car so that you can know what you can write-off as a charitable donation once the charity makes the sale. You might also want to verify what the charity’s intentions are for the vehicle as well because if they keep it or donate it someone, you may end up getting a greater discount than if they sell it.
What Does the IRS Require with a Car Donation?
If you have decided to donate your car to charity and they decide to sell it at an auction to raise money for their charity, remember that you can only write off the amount that the car was sold for, not its actual value. So, if your Cooper BMW is worth $7,500, but it only sold for $5,000, that is the amount that you can actually list on your taxes. Also keep in mind that a charity has 30 days to give you the amount of deduction, by mail, after you have given them the car (remember that the title must be transferred to them as well). This is what the IRS will receive as your receipt or the formal proof of acknowledgment of the donation. If the car is sold for more than $500, along with the acknowledgement, you must submit your name and identification number, the vehicle’s identification number, the date that you made the contribution and a statement regarding the fact that you did not receive anything from the charity in return for making the donation.
What Are Some Additional Things to Keep in Mind?
In making a car donation, there are some additional tips that can make the donation even more beneficial. Confirm that the car will either be used by the charity itself or given to someone in need. If the car is worth more than $500, you will need to fill out an additional tax form (the number is 8283). If you’re planning to make your donation to the Salvation Army or Goodwill, they are generally sold at auctions. And again, if you want to get the maximum tax benefit, you’ll want to give it to a charity that will not auction the car, but will keep it for their own use (or donate it to a person in need) because it bears repeating that you cannot write off its actual value, only the price it was sold for if it is auctioned off. And finally, in filling out your tax form, make sure to itemize your deductions. Otherwise, you will not be able to receive a tax deduction for your car and so while you still did a good thing with your donation, unfortunately, it won’t reflect on your tax return. For more information on making car donations, visit your local DMV (Department of Motor Vehicles) or IRS.gov.