If you have an old or unused vehicle, donating it to charity is a great way to make use of its mechanical or monetary value. You also have the option of taking a tax deduction for a vehicle donation. There are, however, a number of rules governing vehicle donations. Make sure you have all the details before you donate so you can make an informed decision and accurately report your donation on your taxes.
Where Should I Donate?
Not all organizations that do “charitable” work are actually registered charities. If you want to claim a tax deduction for donating your vehicle, make sure the organization you’re donating to is tax exempt.
Most 501(c)(3) organizations are tax exempt, as are many churches. The onus is on you, though, as the donor, to confirm tax exempt status before making a donation. You also need to find out the fair market value of your vehicle before you donate, as well.
How Do I Claim the Donation?
You can claim your vehicle donation on your taxes only if you itemize your deductions. If you take the standard deduction, you can’t deduct any charitable contributions (although you are still welcome to make as many as you wish).
If you do itemize, there are a few different ways you can claim a vehicle donation on your taxes. What you are allowed to claim depends on how the donee uses the donated vehicle.
For example, if the donee turns around and sells the donated vehicle, you can claim the amount that the vehicle sells for. However, if the vehicle sells for $500 or less, you can claim whichever amount is greater: $500 or the fair market value.
On the other hand, if the charity keeps the vehicle and uses it to perform its own charitable work, then you may deduct the whole fair market value of your vehicle.
For assistance sorting through these details and options, contact the tax experts at Taxation Solutions, Inc. today. We are available to help Charlotte-area taxpayers navigate all the rules and regulations surrounding tax-deductible charitable contributions. Contact our team to find out how we can help you!