Tips for Donating a Car to Charity
Many charities request donations of used vehicles to either sell to raise donations for the charity or to use
for the actual day to day tasks the charity performs. If you have a used car that you either can’t sell or don’t care to be bothered with selling this is an excellent way to get rid of that car. However, to get the proper charitable deduction on your taxes there are a few things that you must do.
It is important that you make sure the charity in which you are donating the car is eligible for tax deductible contributions. You will need to request proof of the charities tax exemption status and keep it on record in-case you are ever audited.
The most common reason for an IRS audit is non-cash donations that you list as charitable deductions on your income taxes. It is essential that you request a receipt from the charity that you donate the car to. Additionally, keep records relating to the car and donation.
If the car you are donating is worth more than $500, you have to fill out section A of IRS form 8283 with your tax return. You must also include written acknowledgment of your donation from the charity in which you donated the car. If the charity sells the car they have to give you proof that the car was sold between unrelated parties within 30 days and they also have to show the sale price. If this occurs you can only deduct the price at which the charity sold the car. If they do not sell the car they have to give you a receipt and list how they plan to use the car.
Cars that are worth more than $5000 must be independently appraised to determine their value. To deduct them from your taxes you must fill out section B of IRS form 8283. You must also attach a letter from the charity acknowledging the donation and listing sale price or intended purpose the same as you would for cars valued over $500.
If you are donating a car that is valued at less than $500 and you need to figure out the fair market value use Kelley Blue Book or a similar guide. Make sure that you factor in the mileage, date and condition of the car that you are donating when determining value.
Take plenty of pictures of the car that you are donating before you complete the transaction with the charity. Include a photo of the odometer, the body and the interior. Keep these photos with your records and make sure they are digitally dated.
It is the donors job to value the car so it is important that you keep all the records relating to the car. Keep receipts for improvements that you made to the car and documents that you used in factoring the fair value for the car. If you can’t prove that the car was valued at the price in which you deducted you will have to pay penalties in the event of an audit.