Tax Tips

You've seen the ads: "Donate your car and get a tax break." Technically, that's true.

But some people who give away an old auto might find their tax break smaller than they expected. And a few donors, thanks to the intricacies of vehicle gift guidelines, might be able to boost their deduction amounts.
Giving away a clunker to a charity used to be straightforward. You could claim the old car's fair market value, that is, the amount a willing buyer would pay a willing seller for the product. Typically, you'd refer to auto valuation services, such as the Kelley Blue Book, to get an idea of the donated car's value, give it to your favorite nonprofit and then drive off with a tax break equal to that valuation amount. No more.

Because some taxpayers got greedy, the IRS tightened the rules on how much you can write off for a vehicle donation. The move to put the brakes on auto deductions shifted into high gear after a Government Accountability Office, or GAO, report found that the Treasury lost millions in taxes because of wide discrepancies between the value that some vehicle donors claimed on their tax returns and the actual worth of the donated cars.

Beginning in 2005, tax law changes have dramatically limited deduction amounts for some donated vehicles. The precise tax break depends on the donor's claimed value of the gift and how the charity uses the vehicle.

"This puts taxpayers in the unusual situation of not knowing the size of their deduction when they make the donation," says Bob D. Scharin, RIA senior tax analyst for Thomson Tax & Accounting.

$500 limit
In most instances, a taxpayer must take into account a $500 threshold on vehicular gifts. This value amount applies to autos, boats and even airplanes. When the donated vehicle's value (based on credible fair market value analyses) exceeds that amount, claiming the deduction gets more complicated.
This valuation ceiling comes into play when a charity sells a donated vehicle. In this case, just how much a taxpayer can deduct depends on the amount the sale nets.

For example, you donate your old station wagon that's worth $1,000. Under the old rules, that would be the amount you could deduct. But now, if the charity turns around and sells your donation for $800, your deduction is limited to the lower sales price.

The charity must give you substantiation of the IRS-allowed donation amount within 30days of when you turn your car over to the charity or, if the group sells the auto, within 30 days of the vehicle's sale.

By now, you should have gotten word from the charity as to what it did with your old vehicle. If you haven't heard from the charity, give it a call and ask that it send, or resend, you the donation specifics.

Plus, you now must include a copy of the acknowledgment with your tax return. Previously, such receipts were generally only kept by the taxpayer in case the IRS questioned a claimed deduction.

Well another tips on how to donate a car

It sounds so simple: Donate your used vehicle or boat to charity, avoid the hassles associated with selling it, and score a tax deduction at the same time. Everybody wins, right?

Not necessarily. As the saying goes, the road to h-e-double-hockey-sticks is paved with good intentions, and it can be surprisingly easy to fumble this well-meaning act.

Before you hand one of your biggest assets over to anyone, read the following tips to be sure you’re making the right moves.

1. Avoid middlemen. Numerous for-profit intermediary organizations advertise aggressively on TV, billboards and elsewhere, offering to help you donate your vehicle to charity. Here’s the catch: These organizations typically keep about 50 percent to 90 percent of the vehicle’s value for themselves, and the charities don’t get what they could have gotten. To prevent this, check directly with charities you admire and find out whether they accept car or boat donations.

2. Find a worthy charity. If the charities you normally support aren’t equipped to accept such donations, do some homework until you find a reputable charity that is. You can research charities’ track records online at this Better Business Bureau site and through Charity Navigator.

3. Check the math. If you still feel compelled to use an intermediary organization – possibly because you’re busy – at least ask the organization how much of the car or boat’s value will go to charity. If the organization simply gives charities flat fees — say, $100 for a used vehicle regardless of its value, or $2,000 a month — your donation may not be eligible for a tax deduction.

4. Know the status of your recipient. In order for you to qualify for a deduction, the charity that gets your donation must be an IRS-approved 501(c)(3) organization. Your church, synagogue, mosque or temple likely qualifies. (Check first just to make sure.) You also can visit the Internal Revenue Service’s Web site and search for Publication 78 to find other qualifying non-profit organizations. (Just type “78” into the search field on the IRS home page and you’ll be directed to the right publication.)

5. Do the delivery yourself. Once you’ve identified a worthy charity, recognize that it will have to pay someone to pick up your car or boat for you. To help the charity maximize the benefit of your donation, drop the car or boat off yourself.

6. Transfer the vehicle with care. Want to eliminate all risk of running up parking tickets and other violations after you’ve said goodbye to your donated vehicle? Then formally re-title the vehicle to the charity, and report the transfer to your state’s department of motor vehicles or licensing. Never agree to leave the ownership space on the charity donation papers blank.

7. Your estimate of the donation’s value probably won’t cut it. If your car or boat is worth more than $500, the IRS is going to want to see evidence of how much the charity got for it. (Most charities that accept these donations turn around and sell them for cash.) You’ll need to get a receipt from the charity revealing exactly how much money it made.

8. Know when you can report the fair market value. You won’t need evidence of the sales price if the charity keeps the vehicle or vessel and uses it in its charitable work, or if your donation is worth less than $500. Then you can report its fair market value based on listings from Kelley Blue Book and similar sources.

9. Keep a thorough paper trail. If your donation is worth more than $500, you’ll have to attach IRS Form 8283 to your tax return. If it’s worth more than $5,000, your documentation must include an outside appraisal. You’ll also need proof of the donation, such as a receipt from the charity and a copy of the title change.

10. Be detail-oriented. This paper trail may seem cumbersome, but think about it: This may be one of the biggest charitable donations you ever make. By taking the time to dot the i’s, you can make sure that the charity gets the most benefit and you get the biggest possible deduction.

By Laura T. Coffey
TODAYShow.com contributor

How To Donate Cars For Charity

Car charity is gaining widespread popularity in the United States. It is because of the associated benefits that car donation can bring to people. When you donate an old vehicle, you no longer need to spend money on its care and maintenance. Also, by donating your vehicle, you can do away with the hassles involved in selling your vehicle to an unknown person. Though a car donation process is simple and easy, the tips given below can make the whole process smoother.

Useful Tips on How to Donate Cars for Charity

• First and foremost, acquaint yourself with the IRS (Internal Revenue Service) laws for car donation. If you are donating your vehicle for the first time then you should not that you can claim tax deduction as per IRS rules. These rules were changed in 2004 and since then the amount of tax deduction has been limited to the amount the charity ends up getting by selling your car.

• Secondly, make sure that the charity receiver is qualified. IRS has specified charities that are qualified to receive car donation for tax deduction purposes. You can check the norms on the website of the IRS. In case of any assistance, you can also contact your state charity officials. Most tax deductible charitable organizations are granted with “Letter of Determination” that verifies their status.

• Make sure you get a well documented acknowledgement receipt when the drivers from the charity come and tow away your car. Note that this acknowledgement receipt is for your records only and does not serve the documentation requirements of tax deduction.

• If you do not keep record of the documents clearly stating the value your car has been sold for then the IRS officials can pose a problem. They look into the very details of non-cash donations.

• The charitable organization you are donating your car to should provide you with a receipt that indicated the selling price of your vehicle within 30 days form the receipt of the vehicle. This receipt is of a lot of importance and one of the primary documents necessary for claiming tax deduction.

• If your used car sells for more than $500 then a new IRS form needs to be filled and attached with the annual return.

• If your car sells for $5,000 or more then an independent appraisal will be held. Make sure that you enter the relevant details in the appropriate part of the IRS form.

• Before you car is towed away by the charitable organization, take its pictures from the inside as well as outside. Also, keep your car in a good condition so that it can be towed away comfortably. If all the four tires of your vehicle are not inflated, your donation of car will not be accepte


Donation of car is becoming popular day by day. For charitable car donation easily and quickly, you can contact a vehicle donation center which works on behalf of its supported charities. For more information visit carshelpingamerica.org/articles.

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