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How Do Tax Deductions Work When Donating a Car? 

Donating your car to charity can lead to significant tax savings in case you include it with your charitable contribution deduction. However, doing just a little planning will make sure that you maximize the tax savings of your respective donation. The Internal Revenue Service (IRS ) requires one 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 towards the sales price. Altogether other cases, you should use the car's fair market value. 
Step 1 : Understand just simply the amount the charity sold the car for 
Utilize the price the charity obtains for the car inside a sale as the quantity of your deduction. For instance, when the charity sells the car at auction for $3, 000, your deduction is limited to $3, 000, even when the fair market value is $4, 500. However, when the charity sells the car with a discount to some needy individual or keeps the car to its own internal use, then you are able to claim a deduction to its fair market value. 

Step 2 : Find the car's fair market value 
The IRS suggests which you make use of a reputable used-car price guide to calculate your deduction when utilizing fair market value. For instance, attend your local library and procure a recent copy from the Kelley Blue Book. Search the private party prices for the vehicle depending on its make, model and overall condition. This sort of search could be done on the Internet also. 

Step 3 : Claiming the deduction 
Report the quantity of your deduction on line 17 of Schedule A. Since you are able to only claim a deduction for the car donation in case you itemize, the entire of all of your eligible expenses on Schedule A must exceed the conventional deduction amount for the filing status. 

In case you use TurboTax to ready your taxes, we’ll assist you to determine which filing status will help you get the most important tax savings. 

Step 4 : Additional forms you will need 
Complete Form 8283 in case your car donation deduction is greater than $500. In case your deduction is between $501 and $5, 000, you need to complete Section A. In case your deduction is more than $5, 000, you need to complete Section B. In case you complete Section B, you need to also get yourself a written appraisal as documentation. 

Again, in case you use TurboTax, we’ll ask simple questions and complete all the ideal forms for you personally. 

Tips 

When the charity sells your car sells for $500 or less, you are able to deduct $500 or your car’s fair market value, whichever is less. For instance, in case your car is valued at $650 but sells for $350, you are able to deduct $500. 
Most charities will report the sales price of your respective car to yourself on Form 1098-C. 
Warnings 

You need to have documentation of your respective donation. With a minimum, the documentation you receive coming from the charity must include your name, the vehicle identification number, the date of your respective donation and also a statement describing the goods and services you received, if any.
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