Although the rules around car donation tax deductions have been tightened up since the law changed in 2004, it is still possible to get a sizable tax deduction that is near fair market value.
However, there are many regulations that must be followed for a car donation to qualify for a tax deduction.
The IRS has established certain guidelines that must be followed, so receiving a tax deduction is not as simple as just handing over the keys to the car.
For vehicles with a market value of $500 or less, you should hold on to all of your vehicle records in case you are audited by the IRS.
If you donate a car with a market value over $500 that is sold by the charity, you will need a written notice stating the vehicle was “sold in an arm’s length transaction between unrelated parties.”
To receive the deduction for your vehicle donation, you will need to file an IRS Form 8283 and attach it to your tax return.
For vehicles that are worth over $5,000, you will be required to get an independent appraisal stating the value of the vehicle up for donation.
Tax-filing Tip: Attaching the independent appraisal and the charity’s certification to your tax return can help speed up the process.
If the car is going to be used by the charity for any of their programs, you will also need to get a written statement of the vehicle’s intended use and the planned time of use. In order to receive the deductible, the vehicle must not be sold before this planned time of use.
Note: Ensure the charity you select is an Organization that is a 501(c)(3) if you intend to claim a deductible on your taxes for your vehicle donation.