The giving season is quickly coming upon us; the Salvation Army rings its bells, competitions begin for your local food banks, and the radio may begin asking for vehicle donations. Ever wonder how these programs work, and what exactly happens to the cars that are donated. What vehicles they want, and what happens to them after they’re donated? We’re here to explain the process a little and how this gets you a tax break.
Charities are nonprofits and need money in order to function. Donated vehicles are used by these charities to generate proceeds to fund their programs and buy supplies. If the vehicle is functional, the charity may use the car themselves to transport or haul goods. However, many of these car donation programs are sold by the charity to raise funds.
The selling of these vehicles is either done by the charity themselves, or more commonly by a third party dealership. In general, any vehicle can be donated in most any condition, from cars, trucks, minivans, SUVs, to RVs. Most charities provide free vehicle tow-away if you don’t have the ability to drop off the donation at one of their donation centers.
After donation, a tax receipt will be mailed to you. Your tax deduction for your vehicle may be limited to the price the car is ultimately sold at. A maximum deduction will be given to previous owners who donate their functioning car for the charity’s use. This is determined by the fair market value of the car rather than the price of the car sold. You can ask how what percentage of the sold amount the charity receives, whether they sell third party, and Marburger Chrysler of Shelby, NC suggests you check out market value aids such as Kelley Blue Book or Hearst Black Book to estimate for yourself how much you might get deducted.
The IRS has two price points to remember. If the car is worth more than $500, they require a Form 8283 to be completed and attached to your tax return, along with a written acknowledgement of the donation from the charity. Charities are required to either send you a certification of completed sale, which will limit your deduction to the amount the car was sold for, or a donation receipt if the car doesn’t sell within thirty days. If the car is worth more than $5,000, the IRS requires independent appraisal and a Form 8283. Documentation of this and other upgrades to the car such as recent work or new tires will protect you from an audit should the IRS challenge the value of the car. Taking pictures is also a smart idea, providing a visual aid to the condition of the donation.
There’s nothing like the feeling of helping out those in need with a charitable donation. Do your research and find a charity that you’d be most satisfied helping out, and make sure you have all your paperwork in line before the donation occurs.