Donating your vehicle to charity can help you when tax time comes around and it's also a great way to help people that are in need. The following tips will help you understand your obligations, and what is required to get the charitable donation credited on next years taxes.
Do You Itemize Your Taxes?
In order to receive a tax credit for your charitable car donation you have to itemize your tax deductions using Schedule A of the IRS tax form 1040, if you're not sure check with your tax advisor.
Make Sure Your Charity is Qualified by the IRS
Charitable organizations are typically classified as 501(c) (3) organizations by the IRS. If you're not sure about the status of the charity that you would like to donate your vehicle to you can look them up on the IRS website, www.irs.gov, or you can give them a call, (877) 829-5500.
What's Your Vehicle Worth?
You can only deduct the fair market value for your vehicle. This is a relatively new change to the tax law; don't just use the Blue Book value. The value you claim for your donation will also determine the type of information you will have to record and the tax forms that you will have to file with your taxes. For example, if you claim the value to be $250 or less you will need to record the name and address of the charity, the date of donation, the place where you donated the car, and a description of the car. If the value of your vehicle is greater than $250, but not more than $500, you will need to request a written acknowledgement from the charity. If it's worth over $500, but not over $5000, you will need to record all of the previously mentioned information, as well as filing Form 8283, Section A with your taxes. Anything over $5000 and you will need to record all the information required for the previous categories, as well as a written appraisal from a qualified appraiser, and Form 8283, Section B filed with your taxes.
What About Title and Registration?
In most cases you will want to transfer the car title to the charity you're making the donation to. Make a copy of the title transfer and make sure your registration information on file in with your State is updated to reflect the transfer. And finally, remove your license plates from the vehicle you are donating, this can help you avoid future liabilities following the title transfer.