Planning to donate an old car this year to get a tax deduction next year? Here’s a cheat sheet to get you up to speed on what you need to know.
Read more: Beware of this used car donation gotcha
What kind of charities qualify?
Any 501(c)(3) organization, such as a charitable, educational or religious organization will qualify. If in doubt, you can check online at the IRS website to see if your charity of choice qualifies. Or you can call the IRS Customer Account Services division for Tax Exempt and Government Entities at (877) 829-5500.
Once I’ve donated, how do I actually qualify for the tax deduction?
You must itemize deductions on Schedule A of your Form 1040 tax return. Your deduction can’t exceed 50% of your adjusted gross income.
What kind of paperwork will I need?
According to the IRS, you’ll need written acknowledgment received from the charity if you plan to deduct more than $500.
If you don’t like to deal with paperwork and you know your car would only be sold for $500 or less, Clark suggests that you sell the car yourself and donate the money to the charity of your choice.
How much of a deduction can I claim?
Generally, you’re limited to what the charity sells your vehicle for. Exceptions to this rule include when the charity intends to materially improve your vehicle before sale or when it plans to make a significant intervening use of the vehicle. Learn more in the IRS publication ‘A Donor’s Guide to Vehicle Donation.’
What happens if the amount is over $500?
You’ll need a written acknowledgment from the charity containing the following info:
- Your name and taxpayer identification number
- The vehicle identification number
- The date of the contribution, and one of the following: A statement that no goods or services were provided by the charity in return for the donation, if that was the case; a description and good faith estimate of the value of goods or services, if any, that the charity provided in return for the donation; a statement that goods or services provided by the charity consisted entirely of intangible religious benefits, if that was the case.
Wait, I have more questions…
See the IRS publication ‘A Donor’s Guide to Vehicle Donation‘ for complete details. Below is a chart from the publication.