Last updated on May 16th, 2017 at 02:40 pm
I love giving back. It could be to other people, nature, animals, kids and sometimes even myself! So it’s no surprise that those billboards and ads asking me to donate my car piqued my interest. If you’ve wondered too, you’re in luck! I got the scoop from the Internal Revenue Service (IRS) on how car donations work but let’s be clear here: I work for a car insurance company and I’m no tax expert. Please check in with your tax professional or the IRS’ resources if you are donating your car!
Before I get into the details, here’s an overview of what you need to do if you want to donate your car to a charitable organization:
- Check out the charity. Is it a qualified organization?
- See if you’ll get a tax benefit. There are some restrictions and limitations.
- Check the value of your car. The REAL value.
- See what your responsibilities are as a donor to a charity. You’ll need to keep records and follow certain filing requirements.
Selecting a Charity
We all have causes and charities near and dear to our hearts. But if you want your donation to be tax deductible you’ll need to see if your charity is considered a qualified organization. The most common type of qualified organization is a 501(c)(3) and can include charitable, educational or religious organizations. You can search for your organization on the IRS website but keep in mind that not all qualified organizations are listed. Crazy, right? But churches, synagogues, temples and mosques aren’t required to apply to the IRS for recognition of exemption in order to be qualified organizations so they may not appear on the list.
Qualifying for a Tax Deduction
You can deduct contributions to charity only if you itemize deductions on your Schedule A of Form 1040. And there are certain limitations to consider. For example, your deduction can’t be more than 50% of your adjusted gross income. Other limitations may apply too so it’s a good idea to check Publication 526, Charitable Contributions, which provides detailed information on claiming deductions and deduction limits. It also describes the types of organizations that are qualified to receive tax deductible contributions.
Determining the Value of Your Car
I consider this the trickiest part. You can’t deduct more than the fair market value of your car. For reference, “fair market value” is the price a willing buyer would pay and what a willing seller would accept. Sometimes the fair market value is considerably less than the blue book value. You can find out more about determining the value of your car in Publication 561. If the vehicle you want to donate was used in a trade or business, you’ll want to refer to Publication 526 instead.
Still with me? Good! We’re almost there.
Recordkeeping and Filing Requirements
Depending on the amount you’re claiming as a charitable contribution deduction, you may need to obtain and keep certain records and file an additional form to substantiate your charitable contributions. Here’s a great chart from the IRS that shows what you need and when:
That’s it! While the description is a bit lengthy, rest assured the actual process is much quicker. With the help of a tax pro it’s unbelievably quick and easy. So what’s my final verdict? Give when you can and in this case do your homework and keep good records. Have you donated a car before? Please share your experience in the comments below. Plymouth Rock would love to hear about it!
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