How to Claim Tax Deduction for Car Donation

If  you donate your car to a charitable organization and want to claim tax deduction for the donation, you must be able to itemize your deductions on Schedule A of Form 1040. In addition, you may need to collect certain documents, determine your car's fair market value and fill out Form 8283, Noncash Charitable Contributions as required by IRS.

Step 1: Check the status of the charity you intend to donate your car.

You can claim tax deduction for your contribution only if you donate your car to an organization that is qualified to receive deductible charitable contributions. You can check whether the charitable organization is a qualified organization by either asking the organization or going to the IRS website and using the "Exempt Organizations Select Check" tool.

Step 2: Collect documents for the deduction.

You need to collect one or more of documents listed below in order to figure out the amount of contribution you can deduct on your tax return. For deductions over $500, you also need to attach some of these documents.

1. Form 1098­-C. Contributions of Motor Vehicles, Boats, and Airplanes. You should receive Form 1098-C within 30 days of your donation or the sale of your vehicle by the charitable organization.

2. or a written acknowledgement containing the same information as Form 1098-­C. You should receive the written acknowledgement within 30 days of your donation or the sale of your vehicle. Note, if the acknowledgement contains less information, you can't deduct more than $500.

 3. A written appraisal from a qualified appraiser if your deduction is over $5,000 and not limited to gross proceeds. The appraisal must be made no more than 60 days before you donate the vehicle.

 4. A receipt from the charitable organization if your deduction is less than $250 and you don't have item 1 or 2.

Step 3: Figure out the amount you can deduct.

How much you can deduct on your return will depend on how the charity does with the vehicle and reports on Form 1098-C or the written acknowledgement you received from the charity.

Here is how to determine the fair market value of your car:

1. Get a copy of used car pricing guides from your local library or find a used car guide online, such as Kelly Blue Book.

2. Look for the price listed for a private party sale.

3. Find the price for a car that is the same make, model and year, sold in the same area, with the same or similar conditions, mileage and options.

4. You may have to reduce the listed price if your car has any problems such as engine issue, body damage etc. that are not listed on the guide.

Step 4: Report charitable contribution and take the deduction on your tax return.

How you report the charitable contribution will depend on the amount you are going to deduct on your tax return.

For more information, please see IRS Publication 4303, A Donor's Guide to Vehicle Donation, Publication 526, Charitable Contributions and Publication 561, Determining the Value of Donated Property.

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