for Donating a Car to Charity
A charity that uses a donated vehicle
for transportation or hauling goods obviously benefits directly
from such a donation. However, in many cases the cars will be sold
en masse, either by the charity itself or by a dealer to raise funds
for the charity. In the case of a dealer, the charity generally
receives a flat fee per car, sometimes as little as $45 per car.
Listed below are tips for donors
who would like to donate a car to charity. Legislation in 2004
limits the donor's tax deductions for car donations to the price
at which the charity sold the car.
- To receive the maximum tax deduction on your car donation,
give it to a charity that will use the vehicle in its operations or will
give it to a person in need. Otherwise, your tax deduction will not be based on
the fair market value, but will be limited to the amount of money the charity
receives from the sale of your car. See
Car Donations: Taking Taxpayers for a Ride
- Make sure the charity is eligible to receive tax
deductible contributions. Ask for a copy for your records of the
organizations IRS letter of determination which verifies
its tax exempt status.
- Be sure that you get a receipt from the charity
for your car donation.
- Be aware that non-cash donations are one of the
most common triggers to an audit by the IRS, so youll want
to document the value of the car and keep records of it.
- If the car is worth more than $500, the donor must
complete Section A of IRS
Form 8283 and attach it to their tax return. Donors are
required to file with his/her tax return a written acknowledgement
from the charity. If the charity sells the car, the charity must
provide the donor with a certification that the car was sold at
"arms length" between unrelated parties and the sale
price of the car within 30 days. In this case, the donor's tax
deductions will be limited to the total amount the charity sold
the car for. If the charity does not sell the car, it must provide
the donor with a receipt within 30 days of the sale. The charity
may also be required to provide certification to the donor stating
how it plans to use or improve the car and stating that it promises
not to sell or transfer the car. Penalties are imposed on charities
that provide fraudulent acknowledgements to donors.
- If the car is worth $5,000 or more, an independent
appraisal is necessary. The donor must also fill out Section
B of IRS
Form 8283. For cars worth less than $5,000, use the Kelley
Blue Book, the Hearst
Black Book, or a guide from the National
Auto Dealers Association (NADA)
to determine the market value. Make sure you use the correct figure
for the date, mileage, and condition of your car. Picking the
highest figure for your car model and year without taking into
account other factors may not pass muster with the IRS.
- Take pictures of the car and save receipts for
new tires or other upgrades to verify its value.
- Remember, it is the donor, not the charity, who
is obligated to value the car and who will pay the penalties if
an IRS challenge finds your figure inaccurate.
For comprehensive information of donating
a vehicle, see the IRS' guide to car donations here.