If you have a vehicle that you no longer use, consider donating it! Aside from the altruistic reasons of making a donation, giving your car to charity can be utilized to help lower your taxes. There are various organizations that can benefit from your donation, but if you are after the maximum tax benefits of your donation, here’s what you can do.
- Talk to your accountant. Before making a donation, arm yourself with the correct information. Rather than asking around, it’s best to talk to your accountant or tax attorney who will have the most up to date information on the tax benefits of donating a vehicle. If you don’t have an accountant, you may log on to the IRS website and review the donor information guide.
- Choose a charity. For your donation to be tax deductible, the charity you choose must be on the approved list of the IRS. You can go to the IRS website to find out if your charity of choice is listed as a non-profit charitable organization. Goodwill Industries and the Salvation Army are prime examples of an IRS listed charity. You may also log on to the charity website to get information on your chosen organization. If the organization is not listed as non-profit, the value of your donation may not be utilized for maximum tax benefits.
- Evaluate the vehicle. The higher the value of the vehicle, the greater the amount you can list on the tax deduction form. Get the year, make and model of the vehicle, as well as the odometer reading to get the mileage of the vehicle. Note if the car has any special features, such as four wheel drive, a good sound system and so forth. Next, find the low blue book value of the car by checking it on Kelley blue book at kbb.com. You may also use Edmund’s TMV Used Vehicle Appraiser.
- Know the ways the vehicle will be utilized by the charity. Charities can sell the vehicle at auction. In this case, only the salvage value of the vehicle is what you can list on your tax forms. Will the charity itself use the vehicle to further support its programs, such as the Wheels to Work Program of Goodwill? Finally, some charities pass on a donated vehicle to other people in need as a means of fulfilling the charity’s mission. One such charity is Charity Cars. Donate a Car USA is a group that accepts vehicle donations to pass on to other charities. If your donated vehicle is directly used to further the cause of the charity, you can get the maximum tax benefit for your donated vehicle.
- Know the limit amount of the donation. IRS rules have changed when it comes to car donations. For vehicles valued at over $500, only the actual selling price of the vehicle as sold by the charity can be given the tax credit, not the fair market value of the car. You will find out this value within 30 days from the charity when you get a receipt from them, which you will attach to your tax forms. If the donated vehicle was utilized to fulfill the mission of the charity, then you may list down the full market value of the vehicle. This will depend on the charity you support.
Once you have the paperwork completed, save your forms. Fill out the
corresponding IRS tax forms to list down your itemized tax deduction. Be
sure to include all supporting documents when you turn in your tax