Donating used cars has become an extremely popular way to reduce your taxes and benefit a charity. There is a lot of competition among charities to receive your donation of vehicles. Here are some tips to donating your car to charity:
First make sure the charity you are considering is a recognized non-profit charity, also known as a 501 (c)(3) organization. Some charities ask for donations of cars but do not have the 501 (c)(3)status which means your donation will not be tax deductible. You can find out if an organization is a qualified charity by looking on the IRS website.
Next make sure that the charity has a program to handle donation of vehicles. To maximize the amount of benefit to the charity, the charity should be able to handle the transaction without a “middle man.” If there is a “middle man” or intermediary, then find out what percentage of the donation the charity will receive.
When you transfer title to the charity, make a copy of the transfer document and notify the DMV of the transfer. Also it is a good idea to remove the license plates.
Get a receipt for your donation. The amount of the tax deduction is no longer the fair market value of the car. Your deduction will be determined after your car is sold and you get a receipt for the amount the car sold for. Also to receive a tax deduction for a car worth more than $500, you will need to fill out a IRS form 8283 when you do your taxes. If you are donating a car worth more than $5000, an appraisal is necessary to accompany a completed IRS form 8283. (c)(3) organization.
The IRS publishes a guide to donating your car which you can view online. If you want additional information about how to incorporate charities into your estate plan or how to reduce your taxes, contact us at Scott C. Soady, A Professional Corporation.