Do you have a car that you want to get rid of and want to do more than just trade it in? If you donate it to a charity, it not only benefits the charity and the people it helps, you also might benefit from a tax deduction for car donation. Donating an old car is a win for everyone, but how does it work? Here are some quick tip and tricks for how to donate your car.
Check Out Eligible Charities
Before you donate your car, you want to make sure the charity is a legitimate organization and eligible to receive tax-exempt donations. You can easily check this by using the online IRS Tax Exempt Organization Tool. If the charity you want to donate your car is eligible to receive tax-deductible donations, they will have 501(c)(3) status with the IRS. This is an important step if you want to benefit from a tax deduction for car donation. You can also research the charity to see what they do with their donated cars. Some will give the vehicles to the people they serve, but some might sell the car and use the proceeds instead.
Transfer the Car to the Charity
Once you choose a charity, it’s easy to donate your car. Some large organizations such as Habitat for Humanity and the Red Cross will even come pick it up for you. When you transfer the car to the charity make sure to get written acknowledgment of the donation. This serves as a receipt for your tax deduction for car donation when it comes time to do your taxes.
If the organization sells the car they will provide you with additional documentation of the sale, so you have a record of the sale value of the vehicle.
How Does the Tax Deduction for Car Donation Work?
Once the charity sells your vehicle, the selling price will determine the cash amount of your donation. If it sells for more than $500 you can deduct the entire selling price. If it sells for less than $500 you can deduct the fair market value of the vehicle up to $500. You can find out the fair market value of the car by looking it up on a website such as Kelly Blue Book, NADA Guides, or Edmunds.
What Documentation Should I Get?
If the charity sells your vehicle, they will send you a receipt. It should include the gross selling price of the vehicle, the VIN, year, make, and model, and include a statement that the vehicle was sold at arms-length between two unrelated parties. If the charity does not sell your car, you still need documentation from them. It should include your name and social security number, the VIN, and the date of the contribution. Donating your car to a tax-exempt organization is a good way to get rid of an old car and help others. You also get the benefit of a tax deduction for car donation.
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