If only you could simply drive your car up to a charity, toss them your keys, get a receipt for your donation and walk home feeling pretty good about yourself. Even though that is not 180 degrees away from how the process actually works (at least for some charities), this is the government we are talking about. There are plenty of IRS car donation rules that you are going to have to follow, if you expect to get any kind of a tax deduction out of the deal.
Beware of "fake" charities
First and foremost among the IRS car donation rules is the question you really need an answer to: "Is this a qualifying charitable organization?" In order to be qualified, and thus be able to grant you the mystical tax deduction that you have most likely have heard about, the organization to which you donate your car must be an actual 501(c)(3) entity. In the Internal Revenue Code, such organizations are actually referred to as "charities." If you are not donating to a bonafide charity, you will not get the tax deduction. While this sounds really simple and elementary, there are many organizations that pop up and claim that they are charitable organizations, but really are not. Do your research before handing the keys to your old vehicle over.
File the correct paperwork
Also, do not simply expect that you can deduct your donated car without doing some additional paperwork. Under IRS car donation rules, you must file such deductions under Schedule A of IRS form 1040. This rule is made even more annoying if you try to deduct your way out of paying any sort of taxes, and end up getting burned. Your car donation cannot exceed 50% of your adjusted gross income. So if you wanted to avoid paying taxes at your Walmart job, do not expect that donating your old Lamborghini would be sufficient to pick up your tab.
Limits on how much you can deduct
Under IRS car donation rules, you also have an upward limit on how much you can deduct for your car based upon simple empirically observable logic. If, for instance, you can go to the Kelly Blue Book of car values and determine that your car is worth $2,000, you can deduct up to that amount for your donation. If, however, your car has damage or other issues that would cause it to be hard to sell, you will have to take that figure into account when you figure up your total deduction. If the car can only be sold for $800 given market and car conditions, attempting to deduct the entire $2,000 you thought you could get a moment ago would be more than just ridiculous. It would also be tax evasion.
Beware of "fake" charities
First and foremost among the IRS car donation rules is the question you really need an answer to: "Is this a qualifying charitable organization?" In order to be qualified, and thus be able to grant you the mystical tax deduction that you have most likely have heard about, the organization to which you donate your car must be an actual 501(c)(3) entity. In the Internal Revenue Code, such organizations are actually referred to as "charities." If you are not donating to a bonafide charity, you will not get the tax deduction. While this sounds really simple and elementary, there are many organizations that pop up and claim that they are charitable organizations, but really are not. Do your research before handing the keys to your old vehicle over.
File the correct paperwork
Also, do not simply expect that you can deduct your donated car without doing some additional paperwork. Under IRS car donation rules, you must file such deductions under Schedule A of IRS form 1040. This rule is made even more annoying if you try to deduct your way out of paying any sort of taxes, and end up getting burned. Your car donation cannot exceed 50% of your adjusted gross income. So if you wanted to avoid paying taxes at your Walmart job, do not expect that donating your old Lamborghini would be sufficient to pick up your tab.
Limits on how much you can deduct
Under IRS car donation rules, you also have an upward limit on how much you can deduct for your car based upon simple empirically observable logic. If, for instance, you can go to the Kelly Blue Book of car values and determine that your car is worth $2,000, you can deduct up to that amount for your donation. If, however, your car has damage or other issues that would cause it to be hard to sell, you will have to take that figure into account when you figure up your total deduction. If the car can only be sold for $800 given market and car conditions, attempting to deduct the entire $2,000 you thought you could get a moment ago would be more than just ridiculous. It would also be tax evasion.
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