Tax Information
It is important to take a few important steps in order to ensure that everything is done properly the first time. Whether you go directly through the charity itself or through a car donation center, keep these things in mind:
- MAKE SURE THE ORGANIZATION IS QUALIFIED - Taxpayers must be certain they contribute their car to an eligible organization. Otherwise, the donation will not be tax deductible.
- EXAMINE STATE FILINGS FOR MORE INFORMATION - Taxpayers can also check the organization's state registration and financial filings. These documents are commonly filed with a state charity regulator such as the State Attorney General's Office or the Secretary of State's Office.
- ASK QUESTIONS ABOUT HOW THE DONATED CAR WILL BE USED - You want to make sure the contribution is used for the charitable purpose intended. You may be in contact with an official from the charity itself or through an organization acting on behalf of a charity.
- ONLY DEDUCT THE FAIR MARKET VALUE OF THE CAR - The IRS will only allow a deduction for the fair market value of the car, not the full value of the Kelley Blue Book.
- DOCUMENT THE CHARITABLE CONTRIBUTION DEDUCTION - For donations, taxpayers must document the car donation and its fair market value.
- BE AWARE - Non-cash donations are one of the most common triggers to an audit by the IRS. Remember to document the value of the car and keep records.
- WORTH MORE THAN $500 - If your vehicle is worth more than $500, you must complete the IRS form 8283 and attach it to the tax return.
- TAX-EXEMPT STATUS - in order for you to be able to claim your tax deductions, the charity must have tax-exempt status under section 501 (c) (3) of the IRS.
If you are not sure if a charity is qualified, it is recommended to check with the state charity or the IRS officials. You can check if an organization is qualified by checking their website.
In Canada, organizations must be recognized as a registered charity by the Canada Customs and Revenue Agency (formerly known as Revenue Canada). They are granted the right to issue receipts for income tax purposes.
To qualify as a gift, the following criteria must be met:
- The property is transferred to the ownership of the charity.
- The transfer is voluntary.
- No benefit is provided to the donor or the donor's designee, unless the benefit is of nominal value.
The CCRA website is where there is an abundance of information on this subject. The publications can be ordered online.