If you are considering making a charitable donation of your car and the tax deduction is important, there are some important things to do first. Check out the charities and make sure they are legitimate. Verify the value of your vehicle through an appraiser or by using an online tool such as Kelly Blue Book, kbb.com, or Edmunds.com. Understand your responsibilities as a donor, IRS Publication 4303 provides guidelines.

A common misconception is that everyone who donates a vehicle to charities gets a tax benefit, and the reality is often quite different. You can only take charitable deductions if you itemize your deductions using Schedule A. Therefore, if you plan to file a 1040 EZ form, there is no tax advantage to donating a car.

If you are detailing and making a donation, there are limits that apply to the amount you can deduct. Charitable contribution deductions cannot exceed 50% of your adjusted gross income. Gross income is your total income, including interest and dividends, less certain items like IRA contributions and interest on student loans. When you or your accountant complete your return, it will be calculated as part of the process.

Finding out how much can be deducted comes down to the vehicle being donated as a qualifying vehicle. The IRS defines a qualified vehicle as; “Any motor vehicle manufactured primarily for use on public streets, highways, and highways; a boat or an aircraft. However, a vehicle that you have primarily for sale to customers, such as a vehicle dealer’s inventory, does not it is a qualifying vehicle. “

As a general rule of thumb, the amount you can deduct depends on what the charity does with the donated vehicle. This is usually stated in the documentation provided by the charity when you make your contribution. Charities typically sell your vehicle, which means that the amount of your donation is not what you think your vehicle is worth, but rather what the charity ultimately sells it for.

However, there are exceptions to the rule (gross income limit). If the charity plans to use the vehicle before or instead of selling it, it plans to make improvements to the vehicle before selling it, for example a new paint job and tires, or it plans to give it away or sell it below market value to a charity. objective. Each of these exceptions requires documentation prior to donating the vehicle, so be sure to check IRS rules. before signing anything.

Selecting the appropriate charity for your donation is the final step in securing your deduction. Not all charities are the same, and not all entities that claim to be charities are charities. The most common type of “Qualified Organization” is a 501 (c) (3), for example religious or educational groups. The IRS website has a page that allows you to research your potential IRS.gov beneficiary.

Not all qualified organizations can appear here, churches, synagogues, temples and mosques are not required to apply for IRS recognition of exemption and are often not listed. If your charity or religious organization is not listed, you can contact the IRS Customer Account Service at 877-829-5500. When you call, make sure you have the correct name and address of the charity.

Lastly, always keep accurate records of all your donations, including signed, stamped and dated donation receipts that are complete, your written appraisal from a qualified appraiser if your deduction is more than $ 5,000. If your contribution is between $ 500 and $ 5,000, you must complete Section A of IRS Form 8283 and attach it to your return.