In the past you could give a charity your car, estimate the value and deduct it as a charitable contribution on your income tax returns. Then people started getting greedy, and Congress tightened the requirements to avoid unscrupulous donors from over-estimating the value of their donation. Legislation in 2004 limits your tax deductions for car donations to the price at which the charity sold the car. If you want to get the deduction for your charitable donation of a car, then you will have to follow some procedures and keep some records, but it’s not too bad.
First of all, what will your charity do with the vehicle? Some will actually use the vehicle to transport goods or people, but mostly these cars are sold and the charity gets the proceeds, often as small as $50 per car.
If the car is worth less than $500 or if the charity actually uses the car in its charity work, then you can report its fair market value based on listings from Kelley Blue Book or a similar source. If the car is worth $5,000 or more, an independent appraisal is necessary. The donor must also fill out Section B of IRS Form 8283. If the charity does not sell the car, it must provide you with a receipt, and the charity may also be required to provide certification to you telling how it plans to use the car and promising not to sell it.
What if your car is worth more than $500 and the charity intends to sell it? In that case, the donor must complete Section A of IRS Form 8283 and attach it to your tax return. You also have to file a written statement from the charity which states the sale price they received for it. Whatever the sales price was, that’s how much you can deduct. In other words, you will donate the car, but you won’t know how much your deduction is until your charity sells it. Then you can deduct the actual sales price if you also provide the IRS with the necessary paperwork.
Here are a few more tips: make sure your charity is eligible to receive tax deductible contributions; be aware that a big, non-cash donation such as a car might trigger an IRS audit; take pictures of the car and get a receipt from the charity.