If you want to do something generous, you should donate a car to charity. It is a win-win situation. You will receive a tax deduction, and a certain non-profit organization will have an additional mean of transportation. On the other hand, when you look for a way to maximize all these benefits, things get a lot more complicated. This is why you need to consider several important aspects. Keep reading our article to find out more about this topic.
How to Donate a Car to Charity? Main Guidelines
Choose A Non-Profit Organization That Needs a Car
The best thing to do is to go directly to that charity and discuss the terms of donation. If you choose to use an intermediary company, a part of the money will go to their profits instead of the charity. Most of these agencies keep almost 50 percent of the car’s entire value. Some shady companies even keep 90 percent or even more. So, be careful when you choose the best way to donate a car. However, not all non-profit organizations handle the transaction themselves. Check this aspect before making a decision.
Value Your Car Correctly
IRS has become very attentive when it comes to car donations because they want to avoid frauds. Some car owners have overvalued their vehicles just to get a higher tax deductible sum. Therefore, the agency has doubled their checking methods, including a more thorough audit process. The deduction is now established right after the car is sold. The non-profit organization is required to send a receipt to the donor stating the exact price of the car selling at the auction.
Complete Your Paperwork
Make sure to put everything in order because this kind of donations trigger audits. This should be your main concern especially if your car has a value higher than 250 dollars. If the charity doesn’t initiate any further steps, ask them to give you a written acknowledgment. Also, if the car’s value exceeds 500 dollars, you will need to complete IRS’ section A Form 8283. Then, attach it to your overall yearly taxes. Section B must be completed in the case in which you have a car that is valued at 5,000 dollars.
Use FMV for The Car
FMV stands for Fair Market Value. You should use it in the following cases:
- When the charity decides to keep and use the car instead of selling in at an auction.
- The non-profit organization repairs or improves the car before actually selling it.
- After you donate a car, the charity sells it, using a discount, to a person with low income.
- In the case in which your car is valued less than 500 dollars.
Wrapping It Up
As you can see, you should donate a car to do a good deed and to receive a sum from tax deductions. The most important thing is to choose a non-profit organization in which you truly believe. Also, you should take your time do to this right. We all are aware of the fact that the donor has many things to win in a car donation. However, make sure to do your best and help the charity selling the car at a fair price. This way, everybody will emerge victoriously.
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