According to the Internal Revenue Service, there are a few things you should know before you donate your car to a non profit organization. It is important to check the status of the charity, see if you'll get a benefit on your taxes, find the value of your car, and familiarize yourself with the responsibilities of being a donor. The IRS and state non-profit officials outline the general rules for car donations in Publication 4303. If you want to get a tax deduction for donating your vehicle, you should consider these guidelines.
Before you donate your car, you should make sure that the non profit organization is indeed a charity. A charity is an organization that is qualified to receive tax-deductible donations. To find out if a charity is reputable, you can consult IRS Publication 78, an annual list of non-profit organizations. You should know, however, that not all qualified charities are listed in Publication 78. For example, churches, temples, and synagogues are qualified, but not listed. If you are not sure, you should contact the IRS division for Tax Exempt and Government Entities.
You should be aware of the limitations on non profit donation deductions. For instance, your deduction cannot exceed 50% of your income. If you want to deduct a contribution to charity, you MUST itemize any deductions on your 1040 tax form. IRS Publication 526 provides instructions on claiming deductions and limits. You want to familiarize yourself with any IRS regulations to make certain that you are able to get a tax benefit.
You can only make a deduction for the fair market value of your car. The fair market value is the amount that a buyer would pay and that a seller would accept for the vehicle. IRS Publication 561 contains information on how to determine the value of your car. Some charities will claim that your car is worth the highest value found in the Kelly Blue Book, a used car pricing guide. The IRS urges donors to beware of this common mistake. The condition and mileage of your car are also taken into consideration when determining the value.
If you are claiming a deduction of $250 or more, the IRS requires that you obtain a written acknowledgement from the non profit organization. The acknowledgement must be obtained on or before the date you file your return, and must include either: a statement explaining that nothing was exchanged in return for the donation, a statement explaining what was exchanged by the charity in return for the donation, OR, a statement that any benefits provided in return for the donation were exclusively religious.
If the deduction you are claiming is more than $500, you must fill out another form in addition to your 1040. If your deduction is more than $5,000, you need to get a written appraisal of your car from a qualified appraiser. IRS Publication 4303 contains a chart of the filing and records requirements based on the amount you are claiming for your deductions. IRS information about deducting a car donation from your taxes is widely available on the internet and at public libraries.
By Jennifer Simpson