The Car Donation Tax Deduction Process Explained
Marriage is great. Marriage is all about making each other happy, right? Well, my tax accountant told me this entertaining story of a married couple. The husband had a 1990 Buick sitting in his driveway. His wife constantly nagged him to sell the car or just get rid of it.
After months of bad luck and threats from his wife in attempt to sell his car, he was starting to give up. Then he received an advertisement from the Vietnam Veterans of America about car donations. The catch phrase was donate your car to help Veterans and receive a tax deduction.
To appease his wife, he donated his car. He never told his wife that he donated his car. He told her that he sold the car. The fact is that he didn’t even have to leave his living room and they lived happily ever after. The charity offered a free tow of his car. However, he was very confused on the whole IRS tax deduction for his car donation. So I choose to write this article on how the whole car donation tax deduction process works.
1. Use Kelley’s blue book to determine the fair market value of your car. It would be wise to give a lower estimate for the value of your car because the IRS will never use the highest value. Your car accessories, mileage and condition will also affect the value of your car.
2. Find a reputable tax-exempt charity to donate your car or truck. Your vehicle donation proceeds benefit the charity you choose and the less fortunate are able to buy the car at a charity auction. The total amount of your tax deduction is based on final sales price of your vehicle.
3. The towing company will give you a tax deduction receipt for your vehicle donation. Make sure that the receipt has the organizations name and address, fair market value for your car and the date. If the car is worth more than $500, the IRS will require a IRS Form 8283. Get the 8283 online here.
4. Your car than is sold at an auction. Contact the car donation organization to find out any other details about your car. Then you will be able to add your car donation on your tax return! That sounds pretty simple right? Good luck and remember that your car donation is valuable to the charity in need and to the local community!