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Sorting Out the Details
It sounds cut-and-dry: drop off your old car to a charity and receive a tax break. Simple, right? Yes and no. There is a little more to it than that. Here is what you should know before turning in the old family truckster.

• Qualified vehicles are “any motor vehicle manufactured primarily for use on public streets, roads, and highways; a boat; or an airplane,” according to the IRS.

• Find a worthy charity. Call around to charities you like and ask them if they take donated vehicles. Do a quick web search beforehand if you’re not familiar with a specific charity that offers to take vehicles.

The charity must have IRS 501(c)(3) tax status such as religious organizations and schools. You can verify an organization’s charity status through the IRS’s Publication 78 Cumulative List of Organizations.

• There are middlemen companies who offer to collect and donate your vehicle for you. These companies are for-profit and only a small percentage of the vehicle is given to charity.

• Maximize your donation by delivering the vehicle yourself. Charities often use third-party companies to handle the pick-up and auctioning of your car or boat. However, the company will take a percentage of the car’s auctioned price.

• You’ll need to file a Transfer of Title form with the DMV to ensure ceasing any liability. Also, make sure you remove your license plates.

• Determine the vehicle’s fair market value using a publication like Kelley Blue Book.

• If the fair market value of the vehicle is less than $500, you’ll need a written acknowledgement from the charity with the following:

• Your name
• Charity name
• Date of contribution with one of the following
• A statement that no goods or services were provided by the charity in return for the donation.
• If so, a good faith estimate of the value of goods or services provided in return for the donation.
• A statement that the goods or services consisted of intangible religious benefits.

• If the charity sells your vehicle and its value is more than $500, you’ll need all of the above info plus:
• Your SS or Tax ID number
• Vehicle identification number (VIN)
• A statement showing it was sold at “arm’s length” between unrelated parties.
• Sell date
• Gross sale proceeds amount
• A statement that your deduction may not exceed the sale amount.

• To figure your tax deduction, let’s look at an example. Say your vehicle’s fair market value is $3,000, and the charity sold your vehicle for $2,700. Then $2,700 is your tax deduction.

Also, the charity must provide written acknowledgment within 30 days of the vehicle sale.

For donations between $500 and $5,000 you must complete Section A of IRS Form 8283 and attach to your Form 1040.

• If the vehicle’s value is greater than $5,000 you’ll need:
• A written appraisal completed less than 60 days before you donate the vehicle.
• Completed Section B of IRS Form 8283 signed by an authorized official of the charity.

Keep an accurate paper trail of everything you do. This seems like a lot to know but once you get the ball rolling, it’s not too difficult. And it will probably be the biggest donation (and a nice tax deduction!) you ever make.