You may have several reasons for wanting to donate your car. It might cost more to get it in salable condition than you're willing to pay. Donating your vehicle might also seem like an easier way to get it off your hands. The IRS has very specific rules when it comes to claiming a tax deduction for donated vehicles.
Donations to registered charities, including of vehicles, are usually eligible for a tax deduction. You must follow the IRS rules to claim the deduction and determine how much you will get.
Donate a Car to Charity
To claim a tax deduction for a donated vehicle, you must give it to a qualified charitable organization. If you give your vehicle to a non-qualified organization or individual you cannot take a tax deduction, so a car donation to a family member won't save you any money on your taxes. According to the IRS, a qualified organization is classified as a section 501(c)(3) organization.
Most charities, educational and religious organizations qualify. Before you decide to donate your vehicle to a particular organization, you can verify its 501(c)(3) status with the IRS. Publication 78, "Cumulative List of Organizations" is available to search through on the IRS website.
Remember that you don't donate a car for a tax credit, only a deduction, so the benefit offsets taxable income you may have for the year. How much you'll save on tax depends on your tax bracket, and you can only claim the deduction and save if you itemize your deductions and they come out to more than your standard deduction. You generally can't deduct more than 50 percent of your income for charitable donations.
If the charity uses the vehicle, you can generally deduct its fair market value. The fair market value of your vehicle is the amount that a willing buyer would pay knowing its condition and marketability. A car's "blue book" value does not always coincide with its fair market value.
If the charity sells the vehicle instead, you're usually limited to what the car sells for. If the charity gives it away or sells it for significantly less than its fair market value, you may be able to claim the fair market value.
If the value of your donated vehicle is between $250 and $500, the IRS requires a statement from the charitable organization. The charity must include its name, a description of the donated vehicle, and a statement that the vehicle was received as a gift. You will need this documentation before you claim the tax deduction. The charity must receive the vehicle prior to the end of the tax year. If you are claiming a deduction that exceeds $500, you will need to complete Section A of IRS form 8283. Deductions greater than $5,000 require an appraisal.
When to Itemize
You will need to itemize your deductions to claim the value of your car donation, instead of taking the standard deduction If the car is the only itemized item you have to claim, itemizing your deductions will probably not pay off financially. It's best to figure out whether taking the standard deduction or itemizing will benefit you the most -- if you choose the standard deduction, you won't get any deduction for your donation.
2018 Tax Law Changes
The standard deduction is rising to $12,000 for single people and $24,000 for married couples filing jointly as of 2018. At the same time, tax rates are generally going down. This means that it may not be worth itemizing to claim charitable donations for many people and those who do will often save less on tax.
2017 Tax Law
For 2017, the standard deduction was $6,350 for single people and $12,700 for married couples filing jointly, meaning more people may have itemized and taken charitable donation deductions.
- Bankrate.com: Tax Benefits of Donating a Vehicle
- IRS: A Donor's Guide to Car Donations
- IRS: Publication 526 (2017), Charitable Contributions
- Forbes: New: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More
- Wheels for Wishes: Car Donation Tax Deduction – How To Get The Maximum Tax Benefit Out Of Your Vehicle Donation
- Forbes: IRS Announces 2017 Tax Rates, Standard Deductions, Exemption Amounts And More
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