Planning to donate an old car this year to get a tax deduction next year?
What you need to know about donating your used vehicle to charity
Here’s a cheat sheet to get you up to speed!
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?
The new tax law completely revised this part of the process! Going forward, you can only deduct contributions to charity if you choose to itemize deductions on Schedule A of your Form 1040 tax return.
But because of the new higher standard deduction rates, most people either won’t go that route or they simply won’t have enough deductions when itemizing for it to make sense.
Beginning in 2018 and sunsetting in 2025, the new standard deductions will be:
- $24,000 for Married Filing Joint or Surviving Spouse
- $18,000 for Head of Household
- $12,000 for Married Filing Separate or any Single filer
So here’s an alternative: If you don’t want to bother with itemizing, why not just sell the car yourself and donate the money to the charity of your choice?
What kind of paperwork will I need?
If you decide you still want to itemize your return in order to deduct your vehicle’s fair market value on your taxes, that’s great.
You’ll just need written acknowledgment received from the charity if you plan to deduct more than $500, according to the IRS.
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.