Donating your car to charity can result in significant tax savings if you include it in your charitable contribution deduction. However, doing a little planning will ensure that you maximize the tax savings of your donation. The Internal Revenue Service (IRS) requires you to calculate your deduction in one of two ways, depending on how the charity uses your donation. Deductions for cars the charity sells are limited to the sales price. In all other cases, you can use the car's fair market value.
Donating your
car to charity can result in significant tax savings if you include it
in your charitable contribution deduction. However, doing a little
planning will ensure that you maximize the tax savings of your donation.
The Internal Revenue Service (IRS) requires you to calculate your
deduction in one of two ways, depending on how the charity uses your
donation. Deductions for cars the charity sells are limited to the sales
price. In all other cases, you can use the car's fair market value.
Step 1: Find out how much the charity sold the car for
Use the price the charity obtains for your car in a sale as the
amount of your deduction. For example, if the charity sells the car at
auction for $3,000, your deduction is limited to $3,000, even if the
fair market value is $4,500. However, if the charity sells the car at a
discount to a needy individual or keeps the car for its own internal
use, then you can claim a deduction for its fair market value.
Step 2: Determine the car's fair market value
The IRS suggests that you use a reputable used-car price guide to
calculate your deduction when using fair market value. For example, go
to your local library and obtain a recent copy of the Kelley Blue Book.
Search the private party prices for your vehicle based on its make,
model and overall condition. This type of search can be done on the
Internet as well.
Step 3: Claiming the deduction
Report the amount of your deduction on line 17 of Schedule A. Since
you can only claim a deduction for your car donation if you itemize, the
total of all your eligible expenses on Schedule A must exceed the
standard deduction amount for your filing status.
If you use TurboTax to prepare your taxes, we’ll help you determine which filing status will get you the biggest tax savings.
Step 4: Additional forms you'll need
Complete Form 8283 if your car donation deduction is more than $500.
If your deduction is between $501 and $5,000, you must complete Section
A. If your deduction is greater than $5,000, you must complete Section
B. If you complete Section B, you must also obtain a written appraisal
as documentation.
Again, if you use TurboTax, we’ll ask simple questions and fill in all the right forms for you. Tips
If the charity sells your car sells for $500 or less, you can deduct
$500 or your car’s fair market value, whichever is less. For example,
if your car is valued at $650 but sells for $350, you can deduct $500.
Most charities will report the sales price of your car to you on Form 1098-C.
Warnings
You must have documentation of your donation. At a minimum, the
documentation you receive from the charity must include your name, the
vehicle identification number, the date of your donation and a statement
describing the goods and services you received, if any.
Donating your
car to charity can result in significant tax savings if you include it
in your charitable contribution deduction. However, doing a little
planning will ensure that you maximize the tax savings of your donation.
The Internal Revenue Service (IRS) requires you to calculate your
deduction in one of two ways, depending on how the charity uses your
donation. Deductions for cars the charity sells are limited to the sales
price. In all other cases, you can use the car's fair market value.
Step 1: Find out how much the charity sold the car for
Use the price the charity obtains for your car in a sale as the
amount of your deduction. For example, if the charity sells the car at
auction for $3,000, your deduction is limited to $3,000, even if the
fair market value is $4,500. However, if the charity sells the car at a
discount to a needy individual or keeps the car for its own internal
use, then you can claim a deduction for its fair market value.
Step 2: Determine the car's fair market value
The IRS suggests that you use a reputable used-car price guide to
calculate your deduction when using fair market value. For example, go
to your local library and obtain a recent copy of the Kelley Blue Book.
Search the private party prices for your vehicle based on its make,
model and overall condition. This type of search can be done on the
Internet as well.
Step 3: Claiming the deduction
Report the amount of your deduction on line 17 of Schedule A. Since
you can only claim a deduction for your car donation if you itemize, the
total of all your eligible expenses on Schedule A must exceed the
standard deduction amount for your filing status.
If you use TurboTax to prepare your taxes, we’ll help you determine which filing status will get you the biggest tax savings.
Step 4: Additional forms you'll need
Complete Form 8283 if your car donation deduction is more than $500.
If your deduction is between $501 and $5,000, you must complete Section
A. If your deduction is greater than $5,000, you must complete Section
B. If you complete Section B, you must also obtain a written appraisal
as documentation.
Again, if you use TurboTax, we’ll ask simple questions and fill in all the right forms for you. Tips
If the charity sells your car sells for $500 or less, you can deduct
$500 or your car’s fair market value, whichever is less. For example,
if your car is valued at $650 but sells for $350, you can deduct $500.
Most charities will report the sales price of your car to you on Form 1098-C.
Warnings
You must have documentation of your donation. At a minimum, the
documentation you receive from the charity must include your name, the
vehicle identification number, the date of your donation and a statement
describing the goods and services you received, if any.
