How to Properly Claim Your Car Donation Tax Deduction

Vehicle donation has become increasingly popular. The car donation tax deduction makes this charitable practice even more beneficial to the former car owner. However, to properly claim your car donation tax deduction the Internal Revenue Service (IRS) requires that you adhere to the following requirements:

1. A vehicle donation must be made only to a legitimate charity. To be considered a legitimate charity the group or foundation must be registered with the IRS as a non-profit corporation. This can be verified by doing a search on the IRS website. You will not receive a car donation tax credit if the charity is not registered.

2. If your vehicle donation is more than $250, but less than $500, you will only need to provide an original copy of the donation record with your tax forms to receive the car donation tax credit. This must be recorded on the letterhead of the charity. Keep a copy for your records, but submit the original to the IRS.

3. If your vehicle donation exceeds $500, but is less than $5000, you will need to complete IRS form 1098-C, copy B, and attach it to your tax forms. You will also need to submit the original receipt from the charity and proof of the fair market value of the vehicle to claim the car donation tax credit. If the value of your vehicle donation is $5000 you will need to complete and attach section A of IRS form 8283 (Non-cash Charitable Contributions)

4. If the value of your vehicle donation exceeds $5000 you must complete section B of IRS form 8283 for a non-cash charitable donation. Include proof of the value of the car and original receipt to claim your car donation tax credit. You will also be required to submit an appraisal of the vehicle that was performed by a certified appraiser. When your vehicle is appraised you must request a separate written acknowledgement from the appraiser stating that they completed the appraisal. You will attach the acknowledgement to your tax forms, not the actual appraisal. This is the only way to claim your car donation tax credit for a vehicle exceeding this amount.

The car donation tax credit has made it possible for many more charities to benefit from this type of gift. These charities use these vehicles for job training exercises (car repair and body work) and to sell later to fund their charity work.