The idea of donating to charity is a very noble one, and those that do will feel a strong sense of accomplishment for their honorable contribution. However, when you donate something substantial like a car, you'll want to be sure that you know exactly how to claim a car donation deduction on taxes. In order to get the IRS to see the value of your contribution there are some steps you'll need to make to ensure that you get the recognition you deserve.
In the past, the IRS allowed you to claim the full blue book value of the donated car on your taxes. However, that is no longer the case. In order to get the value of your vehicle approved there are some very definite rules you need to follow. The process is very similar to that of when you sell the car to a private party.
First, you'll have to complete a title transfer for the vehicle and then transfer the registration and complete a notice of transfer/release of liability form with the Department of Motor Vehicles. While these steps are required no matter where you live in the country, the actual process will vary from state to state. However, here are a few things that you'll need to do in addition to these requirements to satisfy the IRS.
Make Sure The Charity Is Qualified
If you know how to claim a car donation deduction on taxes, you want to ensure that the IRS recognizes the charity you've chosen to donate your car to. It must be a tax-exempt organization; only those approved organizations will be accepted when you file your tax claims. These could be religious groups, educational institutions, scientific and humanitarian organizations.
Estimate Your Car's Value
Look up the value of your car in the Kelley Blue Book. Make sure that in addition to the make, model and year, you factor in the condition of the vehicle and the mileage. You want to get the fair market value of the car just as if you were planning to sell it to a private buyer.
Determine What The Charity Will Do With The Car
There will be a difference in the amount you can claim based on how the car will be used. Some will choose to resell the car while others will keep it and use it in their service. If it is sold, you're allowed to claim the lesser of the fair market value, but if it is going to be used, you'll be allowed to deduct the amount found in the Blue Book.
Get It In Writing
The final step in knowing how to claim a car donation deduction on taxes is to make sure that you get written documentation every step of the way. Regulations stipulate that you must notify the IRS within 30 days of the transaction on a Form 1098-C. You must include your Social Security number, the vehicle identification number, the date of contribution and a statement that lists everything you've received to confirm the transaction.
While it may be an honorable gesture to the IRS, careful documentation every step of the way will be the one way you can ensure that you're able to get everything you claim on your donation.