Documents You’ll Need To Donate A Car And Get Your IRS Deduction
by Pamella Neely
Assuming your car donation meets the new gross proceeds rule (that the charity will be actually using the car or giving the car to someone who will use it, as opposed to just selling it off at an auction) you’ll still need one of the following letters to get your IRS tax deduction:
1) a letter from the charity verifying that they will actually use the car. The charity should also include description of that use plus a sentence confirming that the car will not be sold before its stated use is completed.
2) a letter from the charity explaining they will make “material improvements” to the car, with a description of those improvements. The letter should also say the charity will not sell the car until the improvements have been finished.
“Material improvements” means major improvements to the car. An oil change won’t count, but replacing the transmission would. Any mechanical problem that makes the car unsafe would definitely qualify as a material improvement. There is some area of interpretation with what “material improvements” can mean. Err on the side of caution with the IRS. If it seems like you are stretching their meaning, take a step back and try to find a better way to meet the requirements for donating your car.
3) a letter confirming that the charity will be giving your car to someone who needs it and can’t afford to get their own. It helps if the charity can be specific about the people they give cars to.
After you have one of those three letters, the next round of documentation you’ll need depends on how big your tax deduction is going to be.
Deductions of $500 to $5,000
To get this level of deduction you’ll need an official letter from the charity (a dated letter on the charity’s letterhead, signed by an officer of the charity qualifies) that includes the following information:
1) Your name and taxpayer ID number
2) The vehicle identification number (VIN) of the car you donated
3) The date you donated the car
4) A statement saying one of the following:
– that you received no goods or services in exchange for your car donation
– if you did receive something in exchange for your car donation, a statement from the charity outlining what goods or services you got, and what their dollar value was.
– a statement from the charity confirming the only “goods” or “services” you got in exchange for the donation were “intangible religious benefits”, which is IRS-speak for being a generous person.
You also have to complete Section A of Form 8283, “Noncash Charitable Contributions”, and attach it to your tax return. Do not forget to attach the form to your return or you may not be able to deduct your car’s value. If you have more than one kind of deduction (for example: $2,000 in furniture, $1,000 in stocks, plus your car), make sure you attach a 8283 for each kind of donation.
If you don’t meet these requirements you won’t be able to deduct more than $500 for your car donation.
Tax Deductions of $5000 or more
1) You’ll need to complete Section A and B of Form 8283. This means getting the signature of an authorized official of the charity.
2) Get a written appraisal of the vehicle from a qualified appraiser. The IRS has quite a few rules about who qualifies as an acceptable appraiser and what qualifies as an acceptable appraisal. Its all outlined in Publication 561, “Determining the Value of Donated Property”.
If Your Car is Sold
If the charity sells your car (instead of giving it to a needy person) and they actually get more than a couple of hundred dollars for the car at auction (auctioned cars frequently sell for $200-300, leaving the charity with barely $50 after all the fees are taken out), you’ll need to have the charity’s car donation letter include the following additional information:
– that the car was sold in an “arm’s length” transaction between unrelated parties. “Arm’s length” means the sale was between independent parties that were not coerced into making a deal.
– the date the vehicle was sold
– the gross proceeds from the sale
– a statement that your deduction can not exceed the gross proceeds from the sale of your car
You only need to know about Form 8282 if you donate a car and the charity says they are going to use the car themselves. If the charity ends up selling the car within two years of your donation, they have to send you a copy of Form 8282, “Donee Information Return”. The charity will file the original Form 8282 with the IRS.
And one more form for the DMV
Finally, you’ll also need a form from the Department of Motor Vehicles. Before you actually turn the car over to the charity, transfer the title of the car over to the charity, and have the license plates taken off. Most states also require you to fill out a DMV form indicating that the car has been donated.
Pamella Neely writes about how to donate a car and car donation issues for DonateACarToday.com