How to Get a Tax Deduction from Your Car Donation – Know the IRS Rules for Claiming Tax Deductions
Did you know that you can get a tax deduction from your car donation to a charity of your choice? The Internal Revenue Service (IRS) allows qualified vehicle donors to claim tax deductions for their vehicle donations in the previous year.
Bear in mind though that you can only claim a tax deduction from a car donation if you itemize your deductions properly. The total amount of your itemized deductions must also be higher than the standard deduction that you receive for your filing status.
What Are the IRS Tax Deduction Rules for Car Donations?
If you’re making a vehicle donation to a charity, you have to follow IRS rules if you want to receive a tax deduction. Here are the two most important rules you should know:
- The charity must be an IRS-certified 501(c)3 nonprofit.
Make sure that the charity where your car donation will go to is an IRS-certified 501(c)3 nonprofit organization. Otherwise, your donation will not be considered tax-deductible. You can also find other nonprofit organizations such as churches or other religious groups that aren’t required to get a 501(c)3 certification from the IRS. These are also considered as qualified charities.
- You must have the required documents.
The IRS will only give you tax deductions if you present the required documents. For instance, it will ask you to present the tax-deductible receipt that your charity of choice sent to you as proof that you made a charitable contribution to their organization.
In most cases, the IRS will also require you to submit your charity’s written acknowledgment of your donation. Make sure that the document contains the name of the charity, a description of your vehicle, its vehicle identification number (VIN), the donation date, the selling price of your vehicle, and a statement that no goods or services were received in return for your donation.
To have a clearer understanding of how to get tax deductions from car donations, you can always contact the IRS for more information. It also helps to seek the agency’s advice since there might be some additional documents you need to submit before you can claim your tax deduction.
How Much Tax Deduction You Can Claim?
To claim your tax deduction, you must first itemize your deductions on your tax return. The deduction for your car donation applies for the tax year during which you submitted your online donation form to your chosen charity, even if your vehicle isn’t picked up until after the start of the following year.
After the charity sells your donated vehicle, it will send you a tax-deductible receipt showing the sale price of your vehicle.
If your vehicle was sold for $500 or less, you can claim the selling price or your vehicle’s fair market value up to $500. You can calculate your vehicle’s fair market value by using a reputable used-car price guide and/or checking prices online for vehicles of the same make, model, year, and condition.
If your vehicle was sold for more than $500, you can claim only your vehicle’s exact selling price, even if its fair market value is greater than its selling price.
What Are the Tax Forms You Need to Fill Out?
Various tax forms are required based on the value of your donation. If you’re claiming a deduction of $500 or less, you must keep the charity’s written acknowledgment of your vehicle donation together with your tax paperwork.
If you’re claiming a deduction greater than $500 but not exceeding $5,000, you must attach the same document as well as the completed Tax Form 1098-C (Contributions of Motor Vehicles, Boats, and Airplanes) to your tax return. Plus, you are required to complete Section A of Tax Form 8283 (Noncash Charitable Contributions).
If you’re claiming a deduction greater than $5,000, you must attach completed Section B of Tax Form 8283 (Noncash Charitable Contributions). You may also be required to obtain a written appraisal of your vehicle.
We recommend that you consult a tax advisor or the IRS for more specific information about charitable contributions.
Do You Want to Empower Your Disadvantaged Neighbors?
If you have a vehicle you no longer need and you just want to get rid of it, consider donating it to Goodwill Car Donations. When you do so, you’ll be empowering the disabled and other disadvantaged people in your community, enabling them to free themselves from the grip of poverty.
We will auction off your donated vehicle and turn over the proceeds to the Goodwill organizations serving your local area. These IRS-approved 501(c)3 nonprofits will use the money to provide deserving disadvantaged individuals with job and skills training, career opportunities, vocational and educational services, internship programs, financial support, disability benefits, and other critical community-building support services.
These programs and services are all meant to equip disadvantaged individuals with the tools that will help them secure decent and stable jobs, which will help them attain economic independence and a better quality of life.
We’ll pick up and tow your vehicle for free. What’s more, you can count on us to provide you with a seamless donation experience from start to finish. Your donation will also entitle you to receive the highest possible tax deduction you can get.
We accept almost all types of vehicles, including those that need a lot of work.Photo by Erik Mclean under Unsplash License
Help Build Your Community Today!
You can make your community a better place for you and your fellow residents by donating a vehicle to Goodwill Car Donations. Call us at 866-233-8586 or fill out our online donation form now!