Donating your car to charity is a win-win – you get to enjoy car donation tax deduction and do good to the community. However, it is important to follow the right procedure while donating your car to charity and understand the car donation tax deduction implications. For that, thorough knowledge in order to obtain the proper knowledge is necessary. Since 2004, the laws limit the tax deduction to the amount the charity obtains by selling the donated car.
Shortlist a few charities that accept car donation, preferably ones that are into the kind of good work you support and believe in; this would make you feel good about donating your car, and not just for the tax deduction. The next step would be to find out if they directly accept car donation. Involving middlemen often eats away a huge portion of the revenues.
You must remember that donating your car to charity doesn’t automatically imply car donation tax deduction. If car donation tax deduction is the reason you wish to donate your car, you need to make sure that the charity you are donating your car to is 501(c)3 IRS registered. Otherwise, your car donation might not translate into tax deduction. Check out the official IRS website (http://apps.irs.gov/app/pub78) to check if the charity you have in mind is qualified to make car donation tax deduction applicable.
One very significant step in the process of car donation tax deduction is determining the value of your car. If the charity sells your car, you need to get a receipt from them which mentions the amount at which it was sold. If the charity keeps the car, gets work done on it before selling it or sells it for a low price to a needy person, use the Kelley Blue Book (http://www.kbb.com/) to determine the value of your car.
Car donation tax deduction can be categorized into:
1. If the car you wish to donate or have donated is valued $500 or less, you wouldn’t need any more pickup to enable car donation tax deduction.
2. If the car is valued at more than $500, download the IRS Form 8283 from http://www.irs.gov/pub/irs-pdf/f8283.pdf, fill it and attach it to your annual tax application.
Consult your State Motor Vehicle Department to learn if you need your vehicle title in order to allow for car donation tax deduction and enable transfer of ownership rights. If they say you do and you have lost yours, they will provide you with a duplicate title. Once you donate your car, make absolutely sure that you hand it over to them completely, that is, the charity accepts ownership rights. If the car remains registered in your name, you would be legally responsible for any crime the car might be associated with in future. By all means, get a receipt from the charity for the donation. Also, in case the charity doesn’t have a free car pickup service (many of them do), consider driving it over yourself (if it is in running condition). This saves the cost of hiring a driver and gives you the chance to hand it over personally.
