Donation of Cars And Other Personal Property To Charity
If you donate personal property to a charity, you can receive a charitable tax deduction which can decrease your tax bill. The deduction is generally for the fair market value of the item on the date of the donation -- not what you paid for it. Fair market value is the price that property would sell for on the open market. It's the price that would be agreed on between a willing buyer and a willing seller.
It is generally accepted that if you are going to donate personal property, it is preferable to give assets that have appreciated.
- If you have owned the property for more than one year, you can generally deduct the full value at the time of donation.
- If the value is more than you paid for an item, there is no tax on the gain.
On the other hand, it is generally recommended that you not donate roperty that has declined in value because the capital loss is wasted. If you sell the property and take a capital loss on your tax return, you can donate the proceeds.
If the value of the property exceeds $500, you will need to complete and attach form 8283 "Non-Cash Charitable Contributions" to your tax return. The instructions for the form can be obtained at www.irs.gov/pub/irs-pdf/i8283.pdf . The form can be found at: www.irs.gov/pub/irs-pdf/f8283.pdf
If you are audited, you will be asked to show how you determined the value you deducted so it is advisable to do your homework before completing your tax return.
- If the item is valuable, an appraisal from a certified appraiser is worth obtaining. It is also suggested that you speak with a tax adviser. The charity to which you are donating might also be able to assist you.
- For less valuable personal property other than a car or boat:
- You can find help for determining value of personal property at the website of the at the Salvation Arm y. Click on "Ways You Can Help," then on "Donations Receipt - Valuation Guide."
- There are also tax preparation software programs such as TurboTax that offer features to help you value many items which are typically donated.
- If you use this kind of information, keep track of the source and the date you access it. it is evidence for the IRS that you did your homework before setting a value on donated objects.
- For cars, boats and planes: How much you can deduct depends on whether the charity keeps the item or arranges for it to be sold.
- If the charity keeps the car, boat or plane: You can deduct the fair-market value determined by a service such as Consumer Reports Used Car Price Reports (www.ConsumerReports.org ) or Kelley Blue Book (www.kbb.com ).
- If the charity arranges to have the item sold: You can only deduct the amount that the charity gets for it.
- Before turning over your car, boat or plane to a charity, it is advisable find out from the charity how much of the sale proceeds the charity will get. Usually it is only a percentage of the sale price.
- When you donate a car:
- Remove the license plates, registration and inspection stickers unless state law says not to.
- Report the t;ransfer to your state motor vehicle department..
- Cancel your automobile insurance (and get a return for the unused premium).
- For contributions of motor vehicles, boats or airplanes with a value in excess of $500, the charity is required to provide you with form 1098-C which describes the item and valuation. Without the form, you cannot claim a deduction for this type of contribution.
- If you need additional information, see the IRS's "A Donor's Guide To Car Donations": http://www.irs.gov/pub/irs-tege/pub4303.pdf
When you make a charitable donation, be sure to get a detailed receipt of the items. (If you keep a copy with your copy of your tax return, you'll be able to find it if needed in an audit.) The receipt should include the following:
- The name and address of the charity.
- The date of the donation.
- The place where you made the donation.
- A description of the property.
- Written acknowdgement of receipt from the charity.
For additional information about the tax aspects of a charitable contribution, see: Charitable Contributions: Tax Considerations