Who says that old clunker gathering dust in the driveway can save you some cash? Why not donate it to a worthy cause and get a tax deduction at the same time? The following steps will help you out:
1. Locate a legitimate charity
There are thousands of registered charities ready and waiting to accept your vehicle donation. The best bet is to choose a charity with goals and visions that match your own. In order to receive tax benefits for your donation, you will need to gift your car to an IRS-approved charity. Make sure the charity you have in mind is 501(c) compliant. This means the charity was formed and currently operates in accordance with all applicable tax laws.
2. Schedule an appointment for pick-up
Schedule an appointment with the charity so they can pick up the car. Although not strictly necessary, clean up the car and make it look presentable. Make sure your vehicle's title is ready to give to them. The charity obviously cannot accept a car if it does not have a completely free and clear title.
3. Donate your car!
Once the charity picks up your car, you will need to give them the title. Make sure you get a receipt for your vehicle. If the charity decides to keep the car for their own use, you will need to determine the fair market value for your car. Sometimes the charity will donate the car to a person in need. You will need to determine the fair market value just the same. In some cases, however, they will auction off the car and use the proceeds for whatever charitable cause they pursue. In this case, they will send you a receipt and a tax form indicating how much they received for auctioning off your car. Save this for tax season.
4. File your taxes
When you file your taxes, you will need to fill out form 8283 (Non-cash charitable contribution form). Be sure to include it with your 1040 tax return (or whatever form you use to file your return). This form indicates how much you donated your car for and to whom. You may, however, need to get an appraisal for your car. Check with your account or legal advisor. Be sure to hang on to your receipt, along with any other records you have in case you have to prove the validity of your deduction sometime in the future.
5. Sit back and relax!
Enjoy your tax refund and reap the benefits of donating your car!
Tax laws change frequently. Make sure you keep up with the latest tax laws regarding all the tax benefits of car donation. The links below are especially important regarding this matter: