Ever thinking of Donating Your Old Car ? But before you go for it you have to know some important tips about Donating a Car to Charity. Car Donation is now becoming one of the most liked charity worldwide. In this article we will show you some Points that you should Remember Before Donating a Car to Charity. Below are the simple Tips for Car Donation to Charity.
Overview on Donating a Car to Charity
A charity that uses a donated vehicle for transportation or hauling goods obviously benefits directly from such a donation. However, in many cases donated cars will be sold en masse, either by the charity itself or by a dealer to raise funds for the charity. In the case of a dealer, the charity generally receives a flat fee per car, sometimes as little as $45 per car.
Listed below are tips for donors who would like to Donate a Car to Charity. Beware that the donor’s tax deductions for car donations may be limited to the price at which the charity sold the car.
Points to Remember Before Donating a Car to Charity
(Points to Remember Before Donating a Car to Charity #1)
- To receive the maximum tax deduction on your car donation, and to receive the satisfaction that the full value of the car benefits a charitable purpose, give it to a charity that will use the vehicle in its operations or will give it to a person in need. Otherwise, your tax deduction will not be based on the fair market value, but will be limited to the amount of money the charity receives from the sale of your car. If the charity you are donating to does sell the vehicle, ask what percentage of the proceeds they receive.
(Points to Remember Before Donating a Car to Charity #2)
- Ask if the charity accepts car donations directly, without involving a third party. If possible, drive the vehicle to the charity instead of using a towing or pickup service. This will allow the charity to keep the full amount of any proceeds from selling the car.
(Points to Remember Before Donating a Car to Charity #3)
- Make sure the charity is eligible to receive tax deductible contributions. Ask for a copy for your records of the organization’s IRS letter of determination which verifies its tax exempt status.
(Points to Remember Before Donating a Car to Charity #4)
- Be sure that you get a receipt from the charity for your car donation.
(Points to Remember Before Donating a Car to Charity #5)
- Be aware that non-cash donations are one of the most common triggers to an audit by the IRS, so you’ll want to document the value of the car and keep records of it.
(Points to Remember Before Donating a Car to Charity #6)
- If the car is worth more than $500, the donor must complete Section A of IRS Form 8283 and attach it to their tax return. Donors are required to file with his/her tax return a written acknowledgement from the charity. If the charity sells the car, the charity must provide the donor with a certification that the car was sold at “arms length” between unrelated parties and the sale price of the car within 30 days. In this case, the donor’s tax deductions will be limited to the total amount the charity sold the car for. If the charity does not sell the car, it must provide the donor with a receipt within 30 days of the contribution. The charity may also be required to provide certification to the donor stating how it plans to use or improve the car and stating that it promises not to sell or transfer the car. Penalties are imposed on charities that provide fraudulent acknowledgements to donors.
(Points to Remember Before Donating a Car to Charity #7)
- If the car is worth $5,000 or more, an independent appraisal is necessary. The donor must also fill out Section B of IRS Form 8283. For cars worth less than $5,000, use the Kelley Blue Book, the Hearst Black Book, or a guide from the National Auto Dealers Association (NADA) to determine the market value. Make sure you use the correct figure for the date, mileage, and condition of your car. Picking the highest figure for your car model and year without taking into account other factors may not pass muster with the IRS.
(Points to Remember Before Donating a Car to Charity #8)
- Take pictures of the car and save receipts for new tires or other upgrades to verify its value.
(Points to Remember Before Donating a Car to Charity #9)
- Remember, it is the donor, not the charity, who is obligated to value the car and who will pay the penalties if an IRS challenge finds your figure inaccurate.
Now you know the basic Points Before Donating a Car for Charity. For any queries ask us in comment section below.
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