Tuesday, May 30

Tax Deduction for Car Donation: How To

Car Donation

If you’re looking for a way to maximize your tax refund and figure out what to do with that old car taking up space in your driveway, you might consider donating your car. Not only can your vehicle be given a second life to benefit a needy charity, but you can earn a tax deduction for your car donation.

Getting the most out of your tax deduction for car donation does require a little bit of planning.

Here’s what you need to know about how to get a tax deduction for a car donation:

Who Will Take My Car Donation?

It might take a little work to find the best option, but tons of charities and non-profit organizations accept car donations. You do want to make sure that the organization you choose is registered as a 501©3 entity. This designation is what allows you to be able to write off the donation when tax time comes.

The organization may use your car in a variety of ways:

  • Drive it in their daily operations: deliver meals, transportation for disabled persons, etc.
  • Sell it and reinvest the profit into the organization
  • Use it as a learning vehicle, like in an auto mechanics program
  • Repair/upgrade it and give it to another organization or person in need
  • And more

How Is My Deduction Calculated?

The IRS requires that you calculate the value of your tax deduction for car donation in one of two ways:

  1. The vehicle’s fair market price
  2. The sale price of the vehicle

Fair Market Value

The IRS recommends that you use a creditable used-car price guide like Kelley Blue Book. You may also consult private party prices of your vehicle in your area based on its make, model, mileage, and overall condition.

The Sale Price

If the charity sells the car, the amount they get for the vehicle is the amount you can deduct. This includes values that are over and under the fair market value of the vehicle. There is one exception. If the non-profit sells the car to someone in need at a huge discount, then you can claim the fair market value. This typically includes selling your donation for under $500.

How Do I Claim My Tax Deduction for Car Donation?

To claim your deduction, you absolutely obtain documentation of your donation. This paperwork should include certain information: your name, the VIN of the car, the date of the donation, and a statement outlining anything you received in return for the vehicle.

If the fair market value of the sale price is over $500, you’ll need to fill out Form 8283. If the value is under $5,000, you can fill out Section A and be done. If the value is over $5,000, you fill out section B and must have a written appraisal to prove the value.

Your deduction only applies if you itemize on your taxes. So long as all of your eligible expenses exceed the standard deduction amount, you’ll get credit for the donation. If you’re unsure how to proceed with your deduction, check with a local tax expert to ensure it’s filed correctly.

When In Doubt, Check It Out

Getting a tax deduction for your car donation is a great way to help out a local non-profit and help save money on your taxes. If the process seems overwhelming, don’t worry. Most charities that take car donations can help point you in the right direction. You can also meet with a tax professional to assist the process.

Make sure you research any organization that you’re considering. You want to make sure that your car donation goes towards a positive use and that the funds are used to further the organization’s mission.

This post may contain affiliate links. Meaning a commission is given should you decide to make a purchase through these links, at no cost to you. All products shown are researched and tested to give an accurate review for you.

Leave a Reply

Your email address will not be published. Required fields are marked *