The giving season is quickly coming upon us, and with it, thoughts drift to those less fortunate than us. The Salvation Army rings its bells, schools run competitions for your local Food Banks, and the radio may begin playing ads to donate your vehicle to charity programs such as Kars for Kids, Wheels for Wishes, or Vehicles for Veterans. Ever wonder how these programs work, and what exactly happens to the cars that are generously given for the benefit of those in need? What vehicles are taken, and what happens to them after they’re donated? We’re here to explain the process a little and how, exactly, this gets you a tax break, plus how much you can be written off for!
Charities are, by their very nature, nonprofit, and they need money in order to function and give the gifts they’re able to provide to their benefactors. Generously donated vehicles are used by these charities to generate proceeds to fund their programs and buy supplies to help your community. If the vehicle is functional, that may mean using the car themselves to be able to transport or haul goods. Typically, many of these cars are sold by the charity to more directly raise funds. The selling of these vehicles is either done by the charity themselves, or a third party dealership that typically gives the charity a flat sum per car. Any vehicle can be donated in most any condition, from cars, trucks, minivans, SUVs, and RVs to motorcycles, scooters, ATVs, boats, and even ride-on lawnmowers, freeing up your garage or property space. Certain charities provide free vehicle tow-away if you don’t have the means to drop off the donation at one of their recipient centers.
Then, a little later on, a tax receipt will be mailed to you, and you’ll be free to cancel any insurance and registration details with your proof of donation in hand! This, however, is not a consistent write off number or percentage. Your tax deduction for your vehicle may be limited to the price the car is ultimately sold at. A maximum deduction will be given to previous owners who donate their functioning car for the charity’s use, or those charities who will pass on the car to someone in need. This is determined by the fair market value of the car rather than the price of the car sold. You can ask how what percentage of the sold amount the charity receives, whether they sell third party, and Volvo Cars of North Miami, FL suggests you check out market value aids such as Kelley Blue Book or Hearst Black Book to estimate for yourself how much you might get deducted.
The IRS has two price points to remember. If the car is worth more than $500, they require a Form 8283 to be completed and attached to your tax return, along with a written acknowledgement of the donation from the charity. Charities are required to either send you a certification of completed sale, which will limit your deduction to the amount the car was sold for, or an donation receipt if the car doesn’t sell within thirty days. If the car is worth more than $5,000, the IRS requires independent appraisal and a Form 8283. You, not the charity, are obligated to value the car and provide accurate information on the car’s value. Documentation of this and other upgrades to the car such as recent tune ups or new tires will protect you from an audit should the IRS challenge the value of the car. Pictures are also smart, providing a visual aid to the condition of the donation.
There’s nothing like the feeling of giving back to your community and helping out those in need with a charitable donation. Being informed of how the charity will use your vehicle will all the better secure the knowledge you’re making a difference in someone’s life! Do your research and find a charity that you’d be most satisfied helping out, and make sure you have all your paperwork sorted out before the donation.