Car Donation and Tax Deduction

Why on earth would someone want to donate a car? You might ask this question, but there are many reasons, including tax benefits, being charitable or saving time. Perhaps your vehicle isn’t worth much to you, but having it sold for charity is worth a lot to them.

The IRS will give a tax refund of $500 or the sale value of the car if you decide to donate it. You fill out a car donation form and you can allocate your charity from a list of eligible organizations that you want the sale to benefit. You will receive a receipt that qualifies you for the IRS tax rebate, so there is a guaranteed $500 for your car, possibly more. There will be no hassles, no running ads in the newspaper and having people come over to test drive the vehicle and no worries about trying to barter the price or having to pay for last minute repairs.

Most charities will choose to sell the donated vehicle, in which case you can deduct the amount they receive for it. If they decide to use the vehicle for a purpose within the charity, you will be able to claim the fair and average market value at the time you donated the car. They will take into account the current condition of the car and how much you could get if you sold it. That means if there is damage or if it needs repairs, it will be deducted from the value for your car donation tax rebate.

If the vehicle sells for or is worth more than five thousand dollars, you need to fill out an 8283 and 1040 form, plus have an official written valuation, and your form needs to be authorized at the highest levels. If the value or sale price is between $500 and $5000, you would fill in the 8283 form and the standard 1040 that is for all vehicle donations, but you do not need the written appraisal. For cars worth under $500 or sold for that amount you would fill in a 1040 only, along with a written acknowledgment from the charity as to the sale or the use of the vehicle.

Donating a car to a charity car yard can be a lot easier. Simply choosing the charity and leaving the car with them to sell saves you possible hassle. If they need to do any repairs, it will be deducted from you tax rebate and added to the sale price. This means you can’t profit from sending in a broke down vehicle in bad need of repair expecting to deduct the full sale value once it has been fixed.

This can be a great option if you are short on cash and want to sell your car but need a couple of repairs. Be upfront with the charity car dealer and let them know the problems. Tell them you are happy for them to deduct the costs of fixing the problems from your tax rebate, and they will appreciate your honesty. Charity car dealers will often have all the paperwork you need to apply for your car donation tax benefit on site.

It’s not all about the tax benefits though. Donating your car is a rewarding and charitable thing to do. The money raised, sometimes thousands, is donated to your charity of choice, whether directly from you or through a charity car dealership. That is a lot of meals or clothes or money towards research or whatever the charity of your choice contributes to. Not all charities do fall under the qualification for the tax rebate, but most do and the lists are available from the IRS website or the charity dealerships.

Next time you are considering selling your vehicle, think about a charity donation. If you do donate your car, there are definite benefits for the organization of your choosing and yourself at tax time. You may even decide to do it close to the end of the financial year so it doesn’t take too long for you to see the refund! Alternatively the money can come off your tax debt! It is like having an easy sale for your car but just receiving the money for it a while later.

But instead of grinding the figures and crunching the numbers, why not make the decision from your heart? You will get some reimbursement, less hassle, and be doing a very good deed for those in need. Be spontaneous and giving, and next time you are changing over vehicle, donate your used car to an eligible charity of your choice.

Want to know more about Car Donation? Check out Car Donation NY New York
Chin Lee is the webmaster of MidRiversRedCross.org (Car Donation)