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Car Donation and IRS Deductions Explained

Car Donation and IRS Deductions

If car donations and IRS talk have you already rubbing your temples in anticipation of a headache, you’re in the right place.

Today, we’re going to explain how you can get the maximum deduction for your vehicle without breaking a sweat.

Your tax write-off awaits!

IRS rules and regulations you should know when donating your car to charity

Summary of IRS rules and regulations you should know when donating your car to charity

The car donation charity needs to be approved and registered with the IRS

The first thing you need to know is that not all car donation programs are IRS-approved.

If you want to claim a deduction for donating your car, then be sure to check if the charity is registered with the IRS. 

The charity must have a 501(c)(3) status

According to the IRS, the most common types of qualified organizations are section 501(c)(3) organizations, such as charitable, educational, or religious organizations. 

Use the IRS search tool to find approved charities

You can use the IRS’s free online tool to verify whether or not a charity is registered and tax-exempt.

IRS car donation charity search

You can also call the IRS Customer Account Services division for Tax Exempt and Government Entities directly at (877) 829-5500.

Look for examples of reputable charities

Some examples of reputable, 501(c)3 charities are Kars4Kids Inc., Car Donation Foundation, and Charity Cars. 

How to calculate the IRS car donation value

Of course, you want to get the maximum IRS tax deduction for your car donation.

We’re going to help you do that.

Find out what the car sold for

According to the IRS, your deduction is made up of “the gross proceeds from the sale.” 

If the car is sold for more than $500

You can claim the full sale price for your tax deduction. 

If the car is sold for less than $500

You can claim the fair market value up to $500.

In such a case it’s going to be important for you to know the value of your vehicle. 

Determine your fair market value

According to the IRS: “Generally, fair market value is the price a willing buyer would pay and a willing seller would accept for the vehicle when neither party is compelled to buy or sell, and both parties have reasonable knowledge of the relevant facts.”

Look at vehicle pricing guides

You can use a vehicle pricing guide to help you ascertain the value of your vehicle. 

How to calculate the IRS car donation value - Look at KBB

Car donation tax receipt to the IRS

An official receipt will include the date, name of the non-profit organization, the organization’s mailing address, and EIN.

It must also include the donation information as well as the recipient’s and representative’s signatures. 

Here is an example of an official tax receipt from Kars4Kids:

Example of a car donation receipt: IRS requirement

What is a tax receipt and why do I need one?

A tax receipt is a document you receive from a non-profit organization after the donation process.

According to DonorBox, it acts as official proof of the contribution and will help donors claim their tax deductions.

How long does it take to get my tax receipt?

If you donate your car through an IRS-approved program, you’ll automatically receive your receipt within 2-4 weeks from the day of donation. 

Did you know?

The IRS published A Donor’s Guide to Vehicle Donation to answer any questions a potential donor might have. 

IRS instructions for claiming a donated car on your tax return

Once your vehicle is picked up and stored, there isn’t much left for you to do— besides claim that sweet deduction, of course.

If your car sold for less than $500

  • Fill out form 1040 Section A

To receive an IRS deduction for a donated vehicle, you must itemize your deductions, including any charitable contributions, on Section A of Form 1040 from the IRS.

What form 1040 looks like:

IRS Form 1040: Requirement for car donation under 500

You’ll just fill out the amount it sold for on your 1040.

There is no need to contact the IRS separately for your tax deduction.

It can be filed together with the rest of your taxes and will be applied automatically. 

If your car sold for more than $500

You will need to fill out 2 forms.

  • 1098-c
  • 8283 Section A

Form 1098-c

A form for the contribution of motor vehicles, boats, or airplanes. 

What form 1098-c looks like:

IRS Form 1098-c: Requirement for car donation over 500

Form 8283 Section A

Section A of from 8283 discusses noncash charitable contributions.

What form 8283 looks like:

IRS Form 8283: Requirement for car donation over 500

Most charities will take care of this for you.

When you donate your vehicle to Kars4Kids, they’ll provide a tax-deductible receipt that can be used in the place of your 1098. This is the only documentation you’ll need to file with your taxes to get your tax deduction (unless your car sells for more than $5,000).

Ready to get started with your car donation?

Contact Kars4Kids today for free pickup, a vacation voucher, and that tax deduction you’ve been waiting for.