You might be asking yourself this question: If I donate a car is it tax deductible?, the short answer is: it depends. In this article we are going to cover the conditions that must be met in order to obtain a tax deduction through a car donation.
We based this article on Publication 4303 of the IRS, the Internal Revenue Service, the government agency that oversees the rules related to charitable tax deductions. The publication only refers to individuals that donate vehicles and not corporations.
Not every car donation qualifies for a tax write off or deduction, these are the basic conditions that make a car donation tax deductible:
1. You, the donor, must qualify in order to deduct your donations to charities. According to the IRS, deductions are only possible by itemizing them on Schedule A of Form 1040.
There are several restrictions such as: these deductions must not me greater than the 50% of your adjusted gross income. The limits for tax deductions can be checked online through Publication 526 of the IRS, for this matter you can also call the following number of the IRS: (800) 829-3676
2. The charity, on the other hand, must be a valid organization and qualified to accept car donations which can be tax-deductible. They are referred to, most commonly, as section 501(c)(3) organizations.
How can you check if a charity can receive car donations which are tax-deductible? You have the following 3 ways of checking, for example, if they are section 501(c)(3) organizations:
- Fortunately, the IRS provides Publication 78, Cumulative List of Organizations, where you can check if the charity where you are planning to donate your car is capable of receiving donations that are tax deductible. This list is updated annually and has become part of an online search tool of charities, provided by the IRS, named EO Select Check or “Exempt Organizations Select Check” that can be accessed online here: IRS.gov/eo Also consider: the IRS states that some charities may not appear in Publication 78 but can still receive tax-deductible donations. You can always rely on the following resource:
- Call the following toll-free number of the IRS: (877) 829-5500 to verify if a car donation charity is eligible to receive tax-deductible donations. Prepare in advanced the precise name of the organization and the address if possible.
- Organizations that are eligible must provide upon request their letter of determination from the IRS that gives them a tax-exempt status. When in doubt, you have the right to ask the charity for this letter; because according to law, they must make public this and other financial documents.
So if you donate a car it is tax deductible if these basic conditions are met: both you and the charity must be eligible in order for you to receive a tax write off. There are also other filing requirements, according to the amount you want to deduct. For these filing requirements please check Publication 4303.
Remember that it is wise to double check the IRS websites presented in this article or call the agency through the phone numbers we supplied, in case the law has changed or have been updated.