Charity Car Donation Tips

by Colin Burr

If you are thinking of donating your vehicle to charity, you should be aware of the number of issues that will impact your donation. Unless you're donating your vehicle to a charity that will be using it directly, for example, your tax deduction for that car might be restricted by the amount the charity was able to realize when they sold your vehicle. These tips will help you find the right charity to accept your car donation, as well as let you know regarding essential points you need to know before and right after you donate your car.

1. Always check the charity's credentials prior to making a donation. You can only take a tax deduction for goods donated to a charity that's permitted to obtain tax-deductible contributions. Ask the charity to present you with the IRS letter of determination that notes the organization's tax-exempt standing.

2. Get a formal receipt from the charity for your car donation. It is easy to get trapped in the moment with the thought of helping children with your donation, but the receipt is important. It should be on the organization's letterhead-a form letter on their letterhead is acceptable-and state the monetary value of your donation. You'll need the receipt to back up your deduction in case your tax return is chosen for an audit.

3. And speaking of audits, non-cash donations, like car donations, are one of the most likely triggers for an IRS audit. Have your car appraised and keep all records pertaining to your car donation just in case.

4. If you automobile is worth more than $500, you will need to fill out Section A of Form 8283 issued by the IRS. You will have to file that form along with a written acknowledgement from the charity that states the value of your donation.

5. In the event the charity keeps the car for its very own use, it'll need to issue a receipt to you within 30 days, as well as a certificate that states how it intends to use and or enhance the car. The certificate must also state the organization guarantees to not market or transfer the automobile within a stated duration of time.

6. In the event the charity markets the car, it should provide you with a receipt declaring the sales price within 30 days of your donation, together with a certification that they sold the car at "arms-length" between unrelated parties. In this case, you may only subtract the amount of the sale from your taxes.

7. If your automobile is worth $5,000 or even more, you will need to get an independent appraisal and fill out Section B of IRS Form 8283.

8. In case your car is worth less than $5,000, you can determine the market value from the Kelley Blue Book or another acceptable guide to used car value. Make sure to use accurate evaluation, such as the mileage and condition of your car.

9. Document the condition of the vehicle with photos, and save statements for any upgrades or repairs you made prior to donating the car.

10. Keep in mind, you are the one accountable for providing the right value of the automobile on your tax return. In the event you overstate the value of your car donation in order to get a larger tax deduction, you'll be the one paying a penalty, certainly not the charity.

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