There are several reasons for donating your vehicle to a charitable organization of your choice. At times, people may have more than one vehicle and they do not like their cars to be sent to junk spots in the future just because they were unused and parked in their garages. If you have a car that you do not use or want or takes up space in your garage, it may be the right time to donate it. Finding the right organization can be hard however it is important to choose the one which is accredited by IRS.
In addition to just making donations, you may also like to benefit from the car tax deduction associated with donation process. At present, car donation has revised federal regulations and there is lots of misinformation floating around for those people who decide to donate car for tax credit. Apparently, it seems like donating a car to charity is not a financially good decision anymore. This analysis, however, is an oversimplification as donating your vehicle can be financially beneficial for you depending on whom you want to give it away to.
Simply put, you can donate car for tax credit and gain big returns as well. You may also have many questions in mind whether you can donate your vehicle to charity regardless if it has some violations, such as parking tickets. The good news is that you still donate car for tax credit to a charity as long as you follow the steps mentioned below.
Steps of How You Can Donate Car for Tax Credit
Whether you want to donate car for tax credit, to help your community or both, the overall process requires some paperwork. Not only is getting the required documentation for vehicle donation very simple, the donation process itself is a breeze. Generally, these documents include vehicle ownership evidence and the title of ownership which must be transferred in the name of the charity.
Choose the Right Organization
If you want to enjoy benefits of tax deduction for your car donation, you should select a charity which is qualified and IRS accredited. According to the section 501(c) (3), organizations like educational or kids charities and religious groups are the most qualified organizations. Accordingly, you can use ‘EO Select Check” tool on the IRS website to find out if the organization you want to work with is qualified. The same can also be done by contacting the IRS tax-exempt division at their toll free number (877-829-5500. Make sure to have the organization name and address when calling the IRS.
Filling up the Title Form
First of all, you would request for a duplicate document of the vehicle’s title from DMV in your local area. You can also do the same online. Then, get the printout of the form and sign under the seller line. If the car’s ownership is shared by two people, both the individuals need to print and sign the same. Under ‘buyer section’, you will write organization’s name you are donating the car too. Make sure the information you fill are absolutely correct with their right spellings since the DMV will not accept any forms that have scribbled things. Once the form is filled out, keep a copy of it for your record.
The lien release will be another important document to obtain if you purchased the vehicle using the services of a financial institution and this is mentioned in the car’s title document. You can do this by contacting the lending body and asking them to provide you with a letter which will confirm that you paid off the full loan and own the car. Make sure this letter is on the institution’s letterhead and contains the make, year, and Vehicle Identification Number (VIN) of the car. As mentioned above, there are many misconceptions floating around car donation though it is certainly an easy process to peruse. To qualify for tax credit, you will need to itemize your deduction using the 1040 Form (schedule A) which will help you donate car for tax credit to the charity.
Determining the Amount to Claim
If your donated vehicle is going to contribute more than $500, you probably need to work on a written acknowledgement. Usually, this document contains your name and your Tax Identification Number, the VIN of your car, donation date along with a declaration that you did not receive anything in return from the organization, and an approx. value of your vehicle. You will also need to obtain a statement from the charity that they did not deliver you any service for this donation, such as towing the car from your place to their donation area. There are various online portals, such as KBB, Carfax, and Edmunds to determine the market value of your car. Use any of these websites to have an idea of the amount your donation may bring about for a good cause.
If your tax credit is less than $500, you’ll need to provide the IRS with a written statement that must contain name of the charity, description of your vehicle, value of the car provided by the charity, and the declaration that you did not obtain anything from the charitable organization in return of your donation. If it was possible for the charity to auction your car, the amount of your tax credit is limited to the amount the charitable organization received from the auction.
In addition to the aforesaid information, the written acknowledgement must be able to certify that the vehicle was not sold to a friend or relative, and has information about the date of car sale, the amount received from the sale, and a statement that your tax credit may not go above the amount of sale. Once you are done with this declaration, do not forget to attach the Form 8283 and the written acknowledgments to your tax returns.
There are many charities that work with people to provide them with the solutions they need. Donate car for tax credit and win a chance for advancement is much more possible than giving a one-time financial donation to a charity. In other words, when you donate car for tax credit, you also contribute to how it will change the life of a needy.