Do you have an old car that you don’t use anymore? Are you thinking of selling it or donating it? People sometimes decide to donate their old car or broken car because the cost of repair to fix it is much more than its value.
Finding the right charity can be hard at times. Just make sure that your chosen charity is IRS accredited.
1. Claiming a Tax Deduction For Donating A Car
If you want to claim a tax deduction for your donation, you should make sure that the charity or organization is qualified, otherwise, you can’t claim a tax deduction for your donation. The most qualified charities are section 501(c)(3) organizations like religious groups, educational and charitable organizations. To verify if the charity is qualified, you can check the IRS website “EO Select Check” tool, or you may also call the IRS tax-exempt division toll-free at (877) 829-5500. When calling, make sure that you have the charity’s name and address.
2. Qualify for tax deduction.
You need to itemize your deduction on your 1040 Form (Schedule A) to be able to deduct your contribution to the charity.
3. Determine the amount you can claim
.
If your car contribution is more than $500, you need to furnish a written acknowledgement. It must contain the following:
- Your name and your TIN (Tax Identification Number).
- The VIN (Vehicle identification number) of your car.
- The date of your donation and a statement that you didn’t receive anything in return from the charity.
- An estimated value of your car. You can try Edmunds, Carfax or KBB to get the market value of your car.
- A statement that there was no service provided by the charity.
- NOTE: The tax deduction may not exceed $500 if the written acknowledgment does not include all the information.
- Name of the charity.
- Description of your car.
- One of the following: Value of the car that the charity provided and the statement you didn’t receive anything from the charity in return for your contribution/donation.
- The date the car was sold.
- The amount of money received from the transaction.
- A statement that your tax claim may not exceed the amount of the sale.
- The written acknowledgment contains a statement that the charity plans to make an important intervening use of the car. It should have a detailed description of where to use it or its purpose and the amount of time the charity is going to use the car. Also, it should contain a statement that your car will not be sold before the said duration.
- The written acknowledgment must contain a statement that the charity plans to make an improvement to the car. It should be in the detailed description like what parts need to be replaced, etc. It must also include a statement that the charity will not sell your car before the completion of the said planned improvement.
- The written acknowledgment should contain a statement that the charity or organization plans to give or sell your car to the needy below the fair market value of your car. It must also contain a statement that the charity will sell the car to the poor or needy to help the underprivileged who needs transportation.
7. The form that the charity should use is 1098-C (Contributions of Motor Vehicles, Boats, and Airplanes).
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