How to Donate a Car for a Tax Deductions

By Contributing Writer

  • Overview

    Donating a car can be a great way to help out a charitable organization, and it can even give you a tax deduction. In 2004, the rules for taking a tax deduction for donating a car became more strict, and in most cases, the new rules limit the deduction to $500 or the actual amount the charity receives for selling the car. In order to claim any tax deduction for donating a car, you must itemize your deductions using Form 1040 Schedule "A," and provide the proper paperwork and documentation.
    • Step 1

      Choose a charity or non-profit group that is a 501(c)(3) organization. These organizations, along with most churches and religious groups, officially qualify as charities with the IRS, and allow you to take a tax deduction for your donation.
    • Step 2

      Contact the charity to find out of if they accept car donations. Organizations that have experience with vehicle donation programs can help make the donation process easier and provide you with the proper documentation. However, it is still your responsibility to obtain all the paperwork you need for a tax deduction.


    • Step 3

      Find out what types of vehicles the charity accepts. Some organizations, such as food banks, want cars that they can use for deliveries and that are still in good working order. Other groups sell the cars at auction or to scrap metal dealers, and will accept cars even if they don't run. Ask if the charity can pick up the car from you or if you need to deliver it yourself.
    • Step 4

      Use the Kelley Blue Book or a similar resource to determine the fair market value of the car (see Resources below). This value must be accurate for the vehicle's year, make and model, as well as the condition of the car, and must be no more than the value listed for private party sales. If the vehicle is worth more than $5,000, you must get a written independent appraisal of the car from a qualified appraiser, as described in IRS publication 561.
    • Step 5

      Have the car's title, license plate number, vehicle ID number (VIN) and current mileage ready when you donate the car. To document the car's condition, you may want to take photos of the car and keep receipts of any upgrades that could increase the car's value, such as major replacements or new tires.
    • Step 6

      Sign the car title over to the charity, and notify your local DMV that you have donated the vehicle.
    • Step 7

      Obtain a written statement from the charity if you expect to take a tax deduction of $500 or less. This includes the charity's name and the date of donation, your name, a description of the car and a statement that you received no goods or services in exchange for the vehicle. Keep this paperwork safe in case the IRS asks for proof of the donation, and use Form 1040 Schedule "A" to deduct the fair market value of the car up to $500.
    • Step 8

      Obtain a written statement from the charity if you expect to take a tax deduction of more than $500. This includes the charity's name, your name and Social Security or taxpayer ID number, the date you made the donation, the car's VIN, a statement that you received no goods or services in exchange for the vehicle, and an estimated fair market value of the car. If the charity sells the car, make sure to obtain a written receipt documenting the gross proceeds of the sale.
    • Step 9

      Fill out IRS form 8283 Section "A" if you want to deduct more than $500 but less than $5,000 for the car (see Resources below). You must attach the a copy of the written statement from the charity, as well as a copy of the receipt for the sale of the car, if applicable. You may take a deduction for up to the amount of the gross proceeds of the sale. If the charity will use the car and not sell it, you may deduct the fair market value of the car.
    • Step 10

      Fill out IRS form 8283 Section "B" if you want to deduct $5,000 or more for the car (see Resources below). You must include all the items listed in Step 9, as well as the statement from the qualified appraiser.
    • Skill: Moderate
    • Ingredients:
    • Title
    • License plate, VIN and mileage information
    • Receipt from the charity
    • IRS form 1040 Schedule "A"
    • IRS form 8283 (optional)
    • Tip: If the charity makes significant improvements or repairs to the vehicle before selling it, or sells it to a needy individual for less than fair market value as part of the charity's mission, exceptions to the tax deduction limits may apply. See the IRS guide to car donation linked below for details.
    • Warning:
    • Consult a tax advisor for professional advice regarding your specific situation.

    © High Speed Ventures 2011