Tax deductions: What to know before you donate your car 

Tax deductions: What to know before you donate your car

One of the biggest benefits of donating your car is that you might be able to deduct your charitable donation. But just like anything else the IRS controls, it’s not as simple as handing the car over to a charity and then deducting its value from your taxable income. Instead, you’ll need to meet certain criteria in order to deduct the donation from your taxes. You can get more info from the IRS’ guide to vehicle donation.

You’ll need to itemize your deductions

You can claim a charitable deduction (including for cars) only if you itemize your taxes. And unfortunately, with the new tax law changes, most people are better off claiming the standard deduction, so your car donation might not benefit you at all come tax time.

Read Also : Donate car for tax credit

You’ll need to donate to a charity that qualifies

In order for your donation to count as a tax deduction, you’ll need to hand your car over to a registered 501(c)(3) organization or tax-exempt religious institution.

You’ll need to collect certain documents

After you hand off your car to the charity, you should get a written receipt right away. Depending on what the charity does with your car, you’ll also get either a written acknowledgement or a Form 1098-C (Contributions of Motor Vehicles, Boats, and Airplanes) at some point. Keep a hold of this document, as you may need the information to file your taxes, and you may even need to send the document itself in if you’re deducting more than $500 from your taxes.

In addition, if you’re donating a car worth more than $5,000 and the charity doesn’t plan to sell it for cash, you’ll need to get an official written appraisal at least 60 days before you donate the car as well.

Related Post : What Happens When I Donate My Car?

Filing the proper tax forms

Most charities sell the cars that are donated to them for money. In that case, you can deduct the car’s final selling price, which the charity will provide to you with written acknowledgement or Form 1098-C.

You’ll need to file the following documents with your tax return, depending on how much you can deduct:

  • $500 or less: Nothing in particular, but hang on to your records in case you’re audited.
  • $501 to $5,000: File Form 1098-C or the written acknowledgement, plus Section A of Form 8283.
Other Article : Here are 4 simple steps and tips to help you understand and claim a tax deduction for your donated car on your tax return

More than $5,000: File Form 1098-C or the written acknowledgement, plus Section B of Form 8283 and the written appraisal of the vehicle if the charity isn’t selling it.

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