How To Determine The Value Of My Car Donation?
Photo by Tima Miroshnichenko under Pexels License
If you want to take advantage of a car donation tax deduction, one of the first things you’ll need to know is what value you can claim for your vehicle. Contrary to what you may have heard, you can’t just pick an amount and declare that as your donated car’s value. Rather, there are standards and metrics in place to help you know what to deduct.
Essentially, the amount you can claim relates directly to the car’s fair market value and/or the amount for which it sells after donation. To help you make the most of your vehicle donation tax deduction, as well as to better understand how it works, here’s a look at tips for how to make your donation count:
Choose a reputable charity. You’ll reap the biggest car donation tax benefits when you pick a reputable charity for which to donate. Only donations to tax-exempt organizations can qualify for deductions in the first place. The nonprofit partners of Breast Cancer Car Donations are one such option, taking car donations and using them to fund nonprofits fighting Breast Cancer.
Get a tax receipt. The IRS requires that charities send donors tax receipts within 30 days of vehicle sale — and that’s exactly what we do at Breast Cancer Car Donations. This receipt should include the vehicle’s gross selling price if it was more than $500; details like it’s make/model; a statement about the gift being offered; and a statement that you didn’t receive payment for your donation.
Determine usage of car. If the organization to which you donate plans to keep your car and use it, you can deduct the fair market value you found in your used-car price guide. If it plans to sell your vehicle, you’ll need to know the sale price to know what you can deduct. Your tax receipt should include this information for your records.
Adhere to the $500 limit. In cases where the charity sells your donation, there is a $500 rule to remember. Essentially, if your car sells for less than $500, you can deduct either the selling price or its fair market value up to $500. If it sells for more than $500, you can deduct its sale price.
The beauty of car donation is that you can both change lives and reap some tax benefits. In addition to following the five tips above, it’s also helpful to speak with a tax adviser or an IRS representative to clarify any tax questions or concerns about charitable contributions.
Are you ready to make a donation? Contact us to get started!