How To Donate Car For Tax Deduction
Thinking of learning how to donate a car for tax deduction purposes? For those taxpayers that itemize their tax returns, a charity car deduction can save anywhere from a couple hundred dollars up to $5,000 in rebates. This can result in off-setting any money that might be owed or even bring in a bit of extra cash. It is also a great way to get rid of any unwanted car that is either not working properly or not running. Donating a car to charity for tax deduction purposes is a relatively easy process that can be completed with just a few steps.
- Decide if you are filing an itemized tax return. A car donation can only be claimed using the itemized tax return process. Itemizing a tax return can take a bit more time than the EZ file form. Deciding ahead of time if the itemized form will be used will help in the process.
- Decide on a charity or non-profit organization. Many charities and non-profit organizations will accept a car for donation. Many of these places will use the vehicle either for the organization or for people that use that organization and are in need of a car. Other times the vehicle will be auctioned off and the money that is gained from the auction will be used for that charity. If there is a preference that the donation go to a specific cause, check with the various organizations that are supportive of that cause.
- Check that the charity is recognized with the IRS. In order to claim the tax deduction, the charity must be recognized as a not-for-profit organization by the IRS. The IRS website has a list of many recognized charities. If the one of your choice is not listed, email or call the IRS and inquire if that charity is recognized. If the car is donated to a non-recognized organization, the tax deduction will be invalid.
- Contact the organization. Email or phone the charity that will receive the donation. Most accept car donations, others might not. When contacting the organization they will explain the proper procedure for donating a car. Many charities will arrange for a tow truck to come directly to the car and take it to the charity. Sometimes there are donation centers that the car can be dropped off at.
- Decide on a time and place to donate the car. If the car is going to be picked up by a tow truck, arrange for a time and place to have the exchange occur.
- Receive a tax receipt. When the car is picked up there is a little paperwork that the owner must sign. This includes signing the title over to the charity. After all the paperwork is complete, the charity will give a tax receipt that can be filled out by the tax preparer. The tax receipt is used as proof of the donation and the amount of the donation.
- Place fair market value on the tax receipt. The amount of the deduction will be the fair market value of the car. If the car was sold at an auction for more than $500, a letter will be sent to the donator with the exact amount to place on the tax receipt. If the amount is under $500, it is up to the tax preparer to decide what the fair market value of the car was.
- Keep all information on hand for tax time. Keep all information regarding the donation for tax deduction purposes. The information to keep on hand includes the name of the charity, the fair market value of the car, the date of the donation, the place where the donation occurred and any written acknowledgment from the charity. You may need all of this to successfully file your tax deduction.