Tax Refund for Car Donation: How It Works
Many people may not know this, but you can actually get a tax refund for a car donation. Think about it: A vehicle you don’t need any more may save impoverished veterans from a life of destitution. At the same time, your car donation will enable you to receive a substantial tax deduction.
In a way, donating becomes a win-win situation. It’s beneficial to both the donor and the charity they give their donation to.
However, there are certain rules that apply when claiming for a tax deduction for a car donation.
How to Get a Tax Refund for Car Donation
For your tax refund process to be as smooth sailing as possible, you need to know and apply the rules pertaining to tax refunds for car donations. We’ve laid out the most important points below:
- IRS-approved charities
The first thing one needs to know is that a tax deduction for a car donation can only be claimed if your chosen charity is “qualified.” You have to be careful when choosing charities because only donations made to 501 (c)(3) charities such as the nonprofit partners of Veteran Car Donations are eligible for tax deductions. If you’re not exactly sure if your charity is qualified, the IRS has an online list of organizations that are tax-exempt.
- Determine how the charity decides to use your car
When you claim a tax deduction, you need to be able to declare an amount for your deduction. You can either claim a tax deduction for your car’s fair market value or you can claim a tax deduction for whatever price your car was sold.
You can claim your car’s fair market value under these three conditions:
- If the charity decides to use your donated car for its own internal operations;
- If the charity decides to sell your car for a discounted price to a person who is in dire need;
- If the charity made modifications and improvements to your car
If you are not sure of the fair market value of your vehicle, the IRS suggests you consult a used-car price guide such as the Kelly Blue Book or Edmunds.
However, if the charity you donated your car to decides to sell your car through an auction, as per the IRS rule, your deduction will be limited to the selling price of your vehicle even if the fair market value is greater.
The most important thing to do when claiming a tax refund is to carefully prepare all the paperwork needed. When you donate to a charity, be sure to ask for all the required documents. The charity should be able to provide you with a tax-deductible receipt as well as a written acknowledgment of your contribution.
It should also include your name, the date the donation was made, the vehicle identification number (VIN), and a statement confirming that you received nothing in return for your donation. The key trick in maximizing your tax deduction for your donation is to itemize your taxes carefully. If you have an extra car or any other type of vehicle you’re looking to dispose of, donate it to a qualified charity and get a maximum tax deduction in the next tax season.
Veteran Car Donations will put your donated vehicle to good use while making sure that you get the highest tax refund possible. It’s the least we could do for your generous contribution to our cause. Call us at 877-594-5822 and get a tax refund for your car donation today!