In today’s society, it is almost imperative that people have a car in order to get to work, school, the market, doctor’s appointments and other places. There are few places where it is safe or even viable to travel without a car. Sadly, some people are unable to afford a vehicle for a variety of reasons. There are several charities that help these people get cars.
This means that there are people who donate cars to these charities. But what is the reason behind car donations? For some it is the act of giving back, of helping others. For many it is because of the tax benefit for which they may qualify. When considering to donate your car, there are four things that you must do:
(1) Research your chosen charity
If you choose to claim a deduction for your car donation to a charity you need to make sure that the charity is a qualified organization as defined by the IRS. A qualified charity is a section 501 (c) (3) organization. This includes charitable, religious or educational organizations. The IRS has Publication 78, “Cumulative List of Organizations” that lists most charities and is updated annually. Not all charities are listed, though, such as churches, temples and synagogues, but if you want to verify the status of a charity that is not on the list, you can contact the IRS for information.
(2) Check to see if you will get a tax benefit
The only way that you can qualify for a charitable deduction is if you itemize your deductions on Schedule A of Form 1040. There are some limitations on this type of deduction. One such limitation is that the deduction can not be more than 50% of your adjusted gross income. There are publications from the IRS that explain all of the rules and restrictions that are involved in donating a vehicle.
(3) Know the value of your car
You should know the fair market value of your vehicle because that is the maximum amount that you can claim as a deduction. Fair market value should not be confused with blue book value, they can be miles apart. The fair market value is the price that a willing buyer would pay and a willing seller would accept for the vehicle. This is when neither party is compelled to sell or to buy and both parties know the relevant facts (condition of car, mileage, etc).
(4) Find out what responsibilities you have as a donor
In most cases, all that you are required to do is transfer the title and notify the state department of motor vehicles by updating the car registration to the donor. In some states, there are other requirements, so you need to check the laws of your state.
Car donation can be a great way to give back to your community, but it can also be a good tax deduction. However, you should check with the laws of your state and with the IRS to make sure that you are following all of the regulations to the letter. You can access the IRS website and download any of their publications as well as find further information on car donation.