How Do Tax Deductions Work When Donating a Car?

Donating your car to charity can result in significant tax savings if you include it in your charitable contribution deduction. However, doing a little planning will ensure that you maximize the tax savings of your donation. The Internal Revenue Service (IRS) requires you to calculate your deduction in one of two ways, depending on how the charity uses your donation. Deductions for cars the charity sells are limited to the sales price. In all other cases, you can use the car’s fair market value.

Step 1: Find out how much the charity sold the vehicle for
Use the retail price the charity obtains on your car within a sale since the amount of the deduction. For example, in the event the charity sells the automobile at auction for $3,000, your deduction is fixed to $3,000, even should the fair rate is $4,500. However, if your charity sells your vehicle at a discount with a needy individual or keeps your vehicle for its own internal use, then you can definitely claim a deduction due to its fair monatary amount.

Step 2: Determine the auto’s fair market price
The IRS shows that you use a respected used-car price secrets and techniques for calculate your deduction when utilizing fair market price. For example, call at your local library and get a recent copy with the Kelley Blue Book. Search an individual can party prices for the vehicle according to its make, model and overall condition. This type of search can be achieved on the Internet likewise.

Step 3: Claiming the deduction
Report the volume of your deduction on the internet 17 of Schedule A. Since you are only able to claim a deduction on your car donation in the event you itemize, the whole of all your eligible expenses on Schedule A must exceed the typical deduction amount to your filing status.

If you utilize TurboTax to arrange your taxes, we’ll assist you determine which filing status will bring you the biggest tax savings.

Step 4: Additional forms you’ll need
Complete Form 8283 in case your car donation deduction is a bit more than $500. If your deduction is between $501 and $5,000, you should complete Section A. If your deduction is higher than $5,000, you should complete Section B. If you complete Section B, you have to also receive a written appraisal as documentation.

Again, if you utilize TurboTax, we’ll ask a quick question and complete all the right forms to suit your needs.

Tips
If the charity sells your car or truck sells for $500 or less, you’ll be able to deduct $500 or your car or truck’s fair cost, whichever is less. For example, should your car is worth $650 but will set you back $350, you are able to deduct $500.
Most charities will report the sales price of the car to you on Form 1098-C.
Warnings
You should have documentation within your donation. At a minimum, the documentation you obtain from the charity must are young name, the auto identification number, the date of the donation plus a statement describing the products and services you received, if any.

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