What are the Tax Benefits of Donating a Car?

You can donate a car you are trying to get rid of, instead of trading it in or taking it to the junk yard. When you donate a car to charity, there are tax benefits involved. In order to take advantage of these tax benefits, you must first find a charity that will accept your vehicle to be used for a charitable purpose, something such as a business vehicle for the charity operation or a vehicle to be donated to a needy family. Each charity will have different guidelines for the vehicles they accept and the tax deduction that results.

After Car Acceptance

You must itemize deductions to be able to claim the credit for donating a car. When filing your 1040 form, you will also need to fill out a Schedule A form. Both Schedule A and B will be on the same sheet of paper, though you will not need to bother with Schedule B. On the Schedule A side, you should look for the part of the form that says, "Gifts Made to Charity." Once you locate this section, look for the line that says, "Gifts Made Other than Cash or Check." Fill out the selling price of the vehicle on the line. The charity will provide this information to you within 30 days of your vehicle donation. The amount of the vehicle determines the deduction, and you are not entitled to know the amount of the deduction before you donate the vehicle to charity.  If you have donated anything else to charity that was not in the form of cash or check, add it to the line as well. Once this is complete, go to the appropriate line on 1040 to include your itemized deductions to continue your taxes.

Donations over $500

If the non cash donations to charity are over $500, a Form 8283, otherwise known as Noncash Charitable Contributions, must be filed in addition to Schedule A. If any of the items are claimed to be valued at over $5,000, the item must be appraised, and this appraisal must also be included with the form. The item needs to be appraised by a professional.

May Not Benefit

For those who cannot afford to itemize because the standard deduction is higher, it does not matter that you donated a vehicle to charity, because you will not be able to claim the deduction. Do not let this stop you from donating a car however, because you should donate to charity out of the kindness of your heart, rather than for the tax break you may or may not get.