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Donating Your Car to Charity: What You Need to Know

irs statement

The holiday season brings out the giving spirit in all of us. It’s a great time to not only give to your loved ones, but also to give to your favorite charities and causes. You can donate your time, your professional skills, write a check, or you can donate valuable items, like a car, that the charity can sell and use the profits toward their programs. If you decide to donate your car to charity, besides the warm, fuzzy feeling you get from giving to others, you can potentially get a tax deduction out of it as well. Military.com provides some tips below:

Five Tips for Donating Your Car to Charity

  • Identify the charity you would like to donate to – Most people have charities that support causes that are near and dear to their hearts. Identify those charities and make sure they are reputable – by searching Charity Navigator, which was recently named by Kiplinger’s Personal Finance Magazine as the “Best Charity Review Site;” and you can search the Better Business Bureau’s charity review page.
  • Call the charity and make sure they accept car donations – Once you have identified the charity you want to donate to, give them a call to make sure accept car donations. If they do, this is also a good time to coordinate the pick up/drop off. If you want to maximize the charity’s profits from the vehicle, then dropping off the vehicle to the charity is your best bet. If they don’t accept car donations, then find another reputable charity that will.
  • Find out if you qualify for a tax deduction – Not all charities are eligible to receive tax-deductible donations. If you would like to receive a tax deduction for donating your car, the charity that you donate to must be approved by the IRS as a 501 (c) (3) organization. To verify the status of your charity, search IRS Publication 78, Cumulative List of Organizations. Below is a quick reference provided by the IRS.
  • Deductible As Charitable Contributions Not Deductible As Charitable Contributions
    Churches, synagogues, temples, mosques, and other religious organizations Civic leagues, social and sports clubs, labor unions, and chambers of commerce
    Federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt) Foreign organizations (except certain Canadian, Israeli, and Mexican charities)
    Nonprofit schools and hospitals Groups that are run for personal profit
    Public parks and recreation facilities 4 Groups whose purpose is to lobby for law changes
    Salvation Army, Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts, Girl Scouts, Boys and Girls Clubs of America, etc. Homeowners' associations
    War veterans' groups Individuals
    Charitable organizations listed in Publication 78 Political groups or candidates for public office
  • Determine the Value of your vehicle – The maximum amount you are able to deduct on your tax return is what the IRS refers to as “the fair market value of your car,” i.e. what a willing car buyer would pay and what a seller would accept for the car. Check out www.clearbook.com to find out how much your used car is worth, based on analysis of millions of used car listings and sales transactions. For more information on how to determine the fair market value of your car, reference IRS Publication 561.
  • File the proper IRS forms to claim your deduction – Keep in mind that you must itemize deductions on your Schedule A of Form 1040. Be aware that there are certain limitations on charitable deductions, which are detailed in IRS Publication 526. If you’re claiming a deduction greater than $500, you will need to fill out Section A of IRS Form 8283. If the deduction you’re claiming is over $5,000, you’ll need to get a written appraisal of your car from a qualified appraiser, and the appraisal must be made no more than 60 days prior to you donating the car and prior to the due date (including extensions) of your return. You’ll also need to fill out Section B of Form 8283 with the signature of an authorized official of the charity attached to your return. In this case, and if the charity sells or disposes of the car within two years from the date you donate it, the charity will also need to file Form 8282 with the IRS identifying the donor, amount it received from sale or disposal of the car, and will need to provide you with a copy.

We recommend you consult your tax professional and contact the IRS for full details on donating your car to charity.

Replacing Your Donated Car with a New Car?

If you’re planning on purchasing a new car to replace the car you’re donating to charity, be sure to thoroughly research which vehicle you would like to buy and how much it costs. The Military.com Car Buying Service is a great program for the military community. The site allows car shoppers to see what other people actually paid for a particular make/model of a new car (not just MSRP) via TrueCar.com pricing data, then allows car buyers to see current upfront price offers from Military.com Certified Dealers in their area. Military.com also gives consumers the option of avoiding the haggle at the dealership and locking-in a fair market price for that vehicle while they’re online.

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