How to Donate Your Car for a Big Tax Refund
A car donation is one of the best ways to lower your taxes. Knowing the proper paperwork to file and the proper steps to take can help you feel confident about your car donation. Here’s what you need to know.
Navigate the Process of a Car Donation Like a Pro
Donating your used vehicle to a charitable organization is one of the best ways to give your car a new lease on life. But did you know this selfless and charitable act is also one of the best ways to get a pretty decent tax write-off come tax time? Let’s go over everything you need to know about donating your used car in order to get the best refund possible.
Pick a Reputable Organization
For a variety of reasons, you’ll want to pick out a reputable organization to donate your vehicle. For starters, you want to make sure your vehicle will be used in a charitable manner. Do your research on the organization and see how donated vehicles are repurposed. Reputable organizations will typically use your vehicle to give back to the community, fundraise for other charitable organizations and events, and other benevolent purposes. A reputable organization that has good bookkeeping will also help when It comes to securing the proper paperwork come tax time. Do your research and know where your used car is being donated.
Know the Value of Your Vehicle
Once you found an organization you want to work with, it’s important to understand the value of your vehicle in its current state. Even if you’re donating a beater vehicle, it holds value. Take your vehicle to a local dealership or use an online tool like Kelley Blue Book to determine its worth. You’ll need this number to be reflected on the paperwork when you donate it because this is what the IRS will be looking at.
How Much Is a Tax Write-off for a Donated Vehicle
Typically, If your donated car sells for less than $500 then you’ll usually be able to claim it on your taxes to $500 without the need of filing additional paperwork.
If your vehicle sells for more than $500 but less than $5,000, you’ll need to fill out the proper forms (more on that in a minute).
Finally, if your donated vehicle sells for over $5,000, not only will you need to file the appropriate forms, but you also need a written appraisal as well.
Fill Out the Right Forms Come Tax Time
When you’re filling out your taxes, you’ll need to file the proper form in order to claim your car donation. Form 1098 C Is used for donations of vehicles, boats, and even airplanes. Form 8283 is designated for general property, but can also be used for filing your car donation. Depending on which organization you donated your vehicle to that organization may send you Form 1098 C detailing your donation.
Keep Good Records
You’ll want to keep good records of your car donation both before you file your taxes and after tax time. As part of your records, you should include the name and contact info for the charity, the day you donated your car, a description of the vehicle and any photos if need be, and a receipt or other documents provided by the charitable organization.
Keep these records safe even after you file your taxes. In the event you are audited, you’ll have the proper documents to back up your tax write-off.
Donating Your Used Vehicle Does Not Have to Be Complicated
If you work with a reputable organization, you’ll find that the process of donating your used car will be much more simplified and easier to navigate. Know someone who’s getting ready to donate their car? Be sure to share this helpful guide with them as well!
This post may contain affiliate links. Meaning a commission is given should you decide to make a purchase through these links, at no cost to you. All products shown are researched and tested to give an accurate review for you.