If you want to make charitable contribution , it is wise and logical to donate car for tax credit .Your contribution in form of a car will not only help non-profit organization’s missions, this charitable contribution will make you eligible to claim maximum tax credit . It is also simpler now because the changes brought in by IRS in valuation of car in the month of January of 2005 law greatly simplified the whole process and claim of tax credit on car donation to charitable organization. you can claim your tax deduction in the year that you donated your car.
Is tax deduction available for car donation only!
The answer is No. Any contributions of a qualified vehicle that includes any motor vehicles, boats, and airplanes. A qualified vehicle is any motor vehicle manufactured primarily for use on public streets, roads, and highways; a boat; or an airplane. However, property held by the donor primarily for sale to customers, such as inventory of a car dealer, is not a qualified vehicle.
What are IRS Car Donation Rules ?
The number one rule is that the vehicle must be donated to a tax-exempt nonprofit organization. Readers should note that eligible charitable organization are approved by IRS under section 501(c)(3) of Internal Revenue Code . In other words , you should donate the car to a charitable organization which is approved by IRS to receive tax-deductible donations. So ask the organization for the IRS approval letter.
You can also verify if an organization is tax-exempt, through the IRS search tool.
You can also check a charitable organization’s Charity Navigator rating. If you desire to know about their tax filings go to Guidestar, and see their financial profile and how much their highest paid employees are compensated.
You can also get a list of charities that accept car donations directly.
How Much do You Get for Donating a Car?
According to Publication 4303 of IRS, after your donated car is sold at auction for more than $500, you will receive an IRS Tax Form 1098-C in the mail within 30 days after the sale. providing the amount you are allowed to deduct on your taxes.This is the amount of your vehicle donation tax deduction.
If your donated vehicle sells for less than $500, you can claim the fair market value (FMV) of your car up to $500.Please note that the FMV of a vehicle is not generally the same as “blue book” value since elements like excessive wear on the car’s body or engine trouble would lessen the car’s value and notable improvements or upgrades would increase its value
If your donated car sells for over $5000, you’ll also need IRS Tax Form 8283. When filing taxes, you will need to fill out IRS Form 8283 Section B which must include the signature of an authorized official of the charity.
What documents needed for claiming a car tax Deduction?
The paperwork depends on the quantum of tax deduction you are claiming for car donation to charities. So for a tax deduction of $500 or less, the you will need to provide following details to IRS
- The name of the charity,
- information of your donated vehicle,
- and information if any goods or services were received and what their value was.
For a tax deduction of more than $500 to less than $5000, provide following details :
If the car is worth more than $500, the donor must complete Section A of IRS Form 8283 and attach it to their tax return.
Donors are required to file with his/her tax return a written acknowledgement from the charity. If the charity sells the car, the charity must provide the donor with a certification that the car was sold at “arms length” between unrelated parties and the sale price of the car within 30 days. In this case, the donor’s tax deductions will be limited to the total amount the charity sold the car for.
If the charity does not sell the car, it must provide the donor with a receipt within 30 days of the contribution. The charity may also be required to provide certification to the donor stating how it plans to use or improve the car and stating that it promises not to sell or transfer the car.
For a tax deduction of more than $5000, you need to submit
IRS Form 8283 signed by an official of the charity and Form 1098-C or a legal substitute like the receipt from the charity.
While the information on this site - Internal Revenue Code Simplified-is about legal issues, it is not legal advice or legal representation. Because of the rapidly changing nature of the law and our reliance upon outside sources, we make no warranty or guarantee of the accuracy or reliability of information contained herein.
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