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  • If donating a car to charity for a tax deduction, it is important to do research the charity, check the value of the vehicle and find out the donor's responsibilities. Non-cash donations are more often audited by the Internal Revenue Service, so donors must be diligent in keeping proper records and paperwork regarding their car donations.

    Select a Charity

    When selecting a charity, make sure it is a qualified 501(c)(3) charitable, educational or religious organization. Only donations to charities that are classified as 501(c)(3) are eligible for tax deductions. Also, make sure the chosen charity has a need for donated vehicles. Many charities will advertise themselves as 501(c)(3). To verify, check the IRS website at www.irs.gov/eo. Places of worship are not required to register as a charity, even though they qualify.

    Qualify for Tax Deduction

    A tax deduction must be itemized on Section A of tax Form 1040 to qualify. One donation limitation is that the deduction cannot exceed 50 percent of the donor's adjusted gross income. Other limitations may apply, so check the IRS website's "Charitable Contributions" section to make sure the deduction qualifies.

    Determine Car Value

    The most a person can deduct on a car donation is the fair market value of the vehicle. Fair market value is not necessarily the same full value found in used car guides like Kelley Blue Book. A used car guide is a good starting point, but fair market value is often substantially less than full value. For example, a car is valued at $1,600, but it required some work to run reliably. After the deducting the cost of repairs, the car's value is $750. The donor cannot deduct more than $750.

    Keep Records

    Depending on the deductible amount of a donation vehicle, paperwork, records and additional tax forms may need to be filled out and filed. If the donation is more than $250, written acknowledgement must be obtained by the charity. The acknowledgement must include the name of the charity, description of the vehicle and one of the following: A statement that no goods or services were given by the charity in exchange for the vehicle; a description and estimate of the value of goods and services the charity provided in return for the donation; or a statement that goods and services provided were intangible religious benefits only. The donor should keep the acknowledgement for his records. An additional tax form, Section A of Form 8283, must be filled out if the deduction is more than $500. If the deduction is more than $5,000, another tax form must be filled out as well as a written appraisal of the vehicle.

    State Requirements

    According to the IRS, most states require the donor to transfer the vehicle title to the charity, make a copy of the title transfer and update owner records with the motor vehicle administration. Some states have an exception to this, so check with state government for official requirements. Remove the license plate before donating the vehicle, unless state law requires otherwise.

    Source:

    Internal Revenue Service: A Donor's Guide to Car Donation

    More Information:

    Internal Revenue Service: A Donor's Guide to Car Donation

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