Have you ever wanted to donate a car to a favorite cause or charity? This is a great way to serve two purposes, the charity receives a donation that can be used in a number of ways and you get a tax deduction as well the satisfaction of knowing that you were able to help out in a meaningful way. The following information will help you determine if your vehicle is worthy of donation and, if so, how to proceed with the process.
1- If you are contemplating the donation of a vehicle to a charity, it is important to be sure that you are dealing with one that meets the governments' criteria for a charitable entity. These organizations will be registered as a 501(c)(3) or be a church that has also been qualified by the powers that be. This is the only way you will be able to claim the donation on your taxes.
2- Once you decide where you want the donation of your car to go, the market value needs to be determined. The easiest way to effectively determine the value of your car is to utilize the Kelley Blue Book, this is the same book that dealerships use to evaluate the price of a car when it is being bought and sold.
3- If you want to donate a car that has a value over $5,000, then it should be appraised by a professional that is certified in vehicles. This appraisal may be needed if the government should ask questions later.
4- You will need to get a receipt from the charity for your taxes. This will need to have the name of the charity that will be receiving the vehicle, the date that the car was donated, the tax ID number and the pertinent information for the car as well.
5- Most charities will use donated vehicles to help people get transportation back and forth to work. They sell the cars to clients, the price that they get for the car will be what you will be able to claim on your taxes, not what the car is actually worth, although you will need to know both numbers. For example, if you want to donate a car that is "blue booked" at $7,000 and it is sold for $2,500, you will only be able to claim the $2,500 on your taxes.
6- While you may not get the same amount of deductions on your taxes as you would in cash if you sold it out right, you will be able still be able to help people who need it while saving yourself the time and trouble that is involved with selling a vehicle on your own.
7- Don't forget to let the DMV as well as your insurance company that you no longer own and are no longer responsible for the vehicle. They will be able to help you with disposing of the license plate, if this is an issue in your state. Be sure to save the receipt that is given to you, as will as a completely filled out Form 8283 from the IRS.
The Internal Revenue Service allows for many different types of charitable deductions including cash, clothes, goods, and some services. One of the "goods" approved by the IRS that taxpayers may donate is their car. Although the IRS has tightened things up over the past few years, donating a car can benefit a favored charity and help yourself come tax day. Let's take a look at how your car donation can help you and a recognized charity.
Your six year old Buick LeSabre Custom has stood the test of time, but you have decided to buy a 2007 Buick La Crosse Limited to give yourself a car that is new, up to date, and thoroughly reliable. Your LeSabre saw you through long commutes to work, vacations at the shore, and it was the same car your daughter used to learn how to drive. With 140,000 miles on the odometer you know that the trade in value isn't going to be that great, so you consider donating the Buick to a charity such as the kidney foundation or to the association of the blind.
The IRS will reward your generosity if you follow certain ground rules:
--The charity must be recognized by the IRS and have 501(c) 3 status.
--You can only deduct the sale price of the car, not what you think someone might pay for it. Indeed, even though the Buick could possibly fetch more than $5000 if sold privately, you have to list the "gross proceeds" of the resale of the vehicle by the charity. So, if the charity sells your LeSabre for $3700, which is the amount you are allowed to deduct on your income taxes. Your charity of choice will provide written proof of the sale amount to you for your records once the sale has been made.
Just remember if you get to deduct $3700 that doesn't mean your taxes will drop by that amount. Depending on your tax bracket and what you owe the Internal Revenue Service and other deductions, you probably will save yourself a few hundred dollars per year. Of course, your motive for giving should be based in part on helping a charity not just receiving a decent deduction.
So, although the IRS has tightened up the rules concerning donating a car it can still be an important fund raising tool for charities while allowing you to receive a tax deduction and the joy of helping someone out in their time of need.
Both Peter Wallander & Jeff Lakie are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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