Did you know that donating a car does not only benefit charity but also helps to reduce your taxes? Okay, now you know! In this article, I will show you everything you need to know about the concept of donating a car to tax credit. You will learn how the tax deduction process works and how to go about the entire process. I bet you are going to learn so much from this, so, let’s get started right away.
Car donation has helped the lives of many people in the United States. It is one of the ways through which charity organizations get funds to carry out various community projects within and outside the US. By donating your old or unwanted car, you are indirectly helping the lives of others who are unable to afford some basic amenities of life.
And as we know, it is the civic duty of every citizen of the United States to pay taxes directly or indirectly. Hence, many people like you want to know if it is possible to donate a car to tax credit. If yes, how is it done and how beneficial is it? These and many more are the questions that we will be answering in this article as we proceed. So, join us and read to the end as we proceed.
Can I Donate Car To Tax Credit?
Yes, you can donate a car or more to tax credit. Donating a car is not only a way to help charity organizations but will also help your tax credit. Therefore, if you have a car, truck, or any other type of four-wheel vehicle that is not in use at the moment, go ahead and donate it and you will be glad you did.
How Does “Donate Car To Tax Credit” Work?
Donating a car to charity can help you save taxes if it is included in your charitable contribution deduction. Here is how it works. Before donating your car to charity, you will be required to fill out several forms and submit some documents including the Form 1098-C.
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When the car is sold by the organization, the Internal Revenue Service (IRS) expects you to calculate its price and it will be deducted from your taxes. Here, if the price of the donated car is less than $500, you will be able to deduct $500 or the Fair Market Value from your taxes. In other words, you deduct the lesser amount from your taxes.
If, however, the charity sells the car at a very cheap price to the needy or keeps it for personal use, you are expected to deduct the car’s Fair Market Value from your taxes. So, you see that either way, the donation of your car will significantly help to reduce your taxes.
How To Donate A Car To Charity For Tax Credit.
If you wish to donate your car and get its car credit, here is how to go about it. The following are the simple steps to take.
Step 1: Select A Charity To Donate With
This is the beginning of the entire process. Search out genuine and legitimate charities that have evidence of charitable works in the community. Go through their websites to ensure that it is not a scam before you proceed.
Step 2: Fill Out The Car Donation Form.
The form is mostly available on the website of the charity. So all you have to do is visit them and fill out the form. You will be asked to enter some of your details and car information including its VIN, year, model, make, etc. You will also be asked to schedule a pickup time for the car to be towed.
Step 3: Find Out How Much the Charity Sold Your Car
This is the most important step because it will determine how much tax deduction you will get. You can find out how much your car was sold for from the charity. To do this, ensure that you are given access to your Donor Console after the submission of your form.
With the console, you can track the sales of your car including its price and time. Otherwise, contact the customer care unit of the charity to get the details of the sales of the car. Charities are required by law to report the sales price of your car to you on Form 1098-C.
Step 4: Determine The Fair Market Value Of Your Car.
As we noted above, the fair market value of your car will be used for a tax deduction if the charity sells the car at a discount to the needy or keeps the car for its personal use. So, to get the fair market value, the IRS advised that you use a used-car price guide. Some of them are available on the Internet.
Step 5: Claim Your Tax Deduction
To claim your tax credit or deduction, you must provide the documents of your car donation which include your name, Vehicle Identification Number (VIN), date of donation, etc.
Do I Need To Fill Out Other Forms To Claim My Tax Credit?
Yes, the process would involve the filing of other forms. Some of the additional forms are;
- Form 8283 if your car donation deduction is more than $500.
- Section A for deductions between $501 and $5,000.
- Section B for deductions above $5,000. Here you will also need a written appraisal.
Where Can I Donate My Car For Tax Credit?
You can donate your car in many places in the United States, especially to charity organizations. This is because, through car donations, these charities get funds to carry out humanitarian activities within and outside the country. The following are some reputable charities to donate your car for tax credit.
- KCLU
- UNICEF
- Habitat For Humanity
- American Cancer Society
- Special Olympics, etc
What Kind Of Vehicle Can Be Donated To Tax Credit?
Most charities accept all kinds of vehicles including cars, trucks, motorcycles, boats, snowmobiles, farm equipment, recreational vehicles, construction equipment, etc.
If I Donate My Car To Charity, Do I Get A Tax Deduction?
Yes, you will get a tax deduction also known as a tax credit when you donate your car to a charity. You, however, must go through the right process as shown above, and ensure that it is donated to a legitimate charity.
Conclusion
From the article, I hope you are convinced that donating a car is a win-win situation as it is beneficial to you, the charity, and the community. This is because as much as you are serving humanity, you will also get tax deductions. We have shown you how to donate your car for tax credit and hope that by duly following the explained steps, you will get your tax credit in no time.