Is the Charity Qualified?
For a deduction to be legally filed with the IRS, the charity must hold 501(c)(3) non-profit status with the IRS. If you are unsure of the status of your chosen charity, be sure ask for a copy of their non-profit confirmation. The amount of deduction which you are eligible to take depends greatly on the value of the car you donated. If the donated car was worth $250 or less, simply keep a record of your gift on file. If the value of the donation was between $250 and $500, make sure to include in your records a note of acknowledgment from the charity. If the value was more than $500 but less than $5,000, you’ll need to file IRS Form 8283 with Schedule A completed. In the event the car’s value was greater than $5,000, you will need to file that same Form 8283, complete Schedule B and include a qualified appraiser’s estimate of the car’s value. It may also be helpful to consult the Guide to Vehicle Donation created by the IRS.
Concerning anything tax-related, it is important that all paperwork be complete and up to date. Regarding car donation, it is important to have the following information on record.
- The name of the charity as well as its address.
- The date the donation was made.
- The location where the donation was made.
- A full description of the donated vehicle.
Understanding Deduction Type
After the donation of a car, the type and amount of deduction that can be taken depend on the way the charity chooses to use the donation. The donor will either be deducting the gross value of the car or it’s fair market value. If the charity sells a donated car and uses the proceeds in its work, the amount of deduction cannot exceed the final sales price of the car.
On the other hand, the charity may use the donated car as it works to fulfill its goals. They may intend to use the donated vehicle in the day-to-day operation of the charity or they may be providing the car to a person who could not otherwise afford one. In either of these scenarios, the donor can deduct the fair market value of the car.
Determining Fair Market Value
Determining the fair market value of a vehicle begins with learning its book value. There are many online calculators, like those provided by Kelley Blue Book or Edmunds, to help with this task. Be sure not to limit your estimate solely to the make, model, and year of the car; also make allowances for the overall condition of the car. If it is in need of expensive repair, be sure to deduct that from the book value to provide a more honest and realistic estimate of its market value.