How to Claim a Tax Deduction from a Donated Vehicle

Check the IRS Qualification of the Charity
Prior to donating your vehicle to a good cause, investigate the designated beneficiary of your donation. In order for you to receive a tax deduction for the donated vehicle, the charitable organization must be categorized as a 501 (c) (3) public charity. Simply because an business is categorized as non-profit doesn’t necessarily mean that the Internal revenue service will qualify your vehicle donation as a deduction. Political organizations categorized as 501 (c) (4) are actually non profit, but are not regarded as charities, so make certain that the designated beneficiary maintains the correct standing. Public non profit organizations often sell the donated vehicles and cash in on the profits. You may notice advertisements from intermediaries which accept the vehicle and sell it, supposedly on behalf of the actual charity’. These 'for profit' firms may retain up to 90% of the actual monies received through the sale of the vehicle. Arrange to donate your vehicle directly to the charitable organization; transport it there yourself in order to save any transportation costs the charity may incur. This will enable the charity take full advantage of your donation.

How Much Can You Deduct from Taxes?
Assigning a value for the donated vehicle is a process developed by the Internal Revenue Service. In the majority of cases, the value of your vehicle is based on the actual selling price the charitable organization receives after they auction the vehicle. This rule is with regard to vehicles worth more than $500. The owner gives the vehicle to the charitable organization, but cannot claim the actual deduction until the charitable organization sends them a sales receipt. Fair market value, FMV, of the vehicle can be deducted from federal income taxes if the charitable organization keeps the vehicle and makes use of it, improves it and then markets it. If the charity sells the vehicle for less than FMV to an individual with low income, you can deduct the fair market value of the vehicle from your taxes, not the actual sales price.

What Type of Paperwork is Involved?
Paperwork with regard to the actual vehicle donation process is comparable to selling the vehicle. A person will have to convey a clean title to the charitable organization and also complete the donation forms that the particular charitable organization requires. It is important to assign ownership of the vehicle to the charitable organization, or you will continue to legally own the vehicle. Nearly all charitable groups will sell the vehicle at public sale as fast as possible and if the new property owner doesn't title it properly, you are responsible for any tickets or criminal activity associated with the vehicle. If the vehicle sells in excess of $500, you must also complete the IRS form 8283 and include it along with your annual income taxes.