Tax season is upon us and CPA’s and harried men and women across the country are trying to navigate the confusion of the IRS tax codes to see how much of their hard earned money they get to keep this year. The good news for your generous heart and your thrifty pocketbook is that donating a car can be a great way to get you a tax credit.
What You Need to Know
Donating a car is always a good idea when giving to a charity, but in order to make your gift eligible for tax credit, there are certain rules you have to follow. Here are the basics.
1. Know What It Sold For
This number is important if your car sold for more than $500. Donate A Car provides you with this information on IRS Tax Form 1098-C. Keep this information in your financial records and make sure your accountant has it available when doing your taxes. If you donate a car that sells for MORE than $500 you’ll need IRS Form 8283 Section B.
2. Know the Fair Market Value
Knowing the Fair Market Value (FMV) of your vehicle is important if the sale of your car was less than $500. The IRS allows you to claim up to $500 FMV if the car sold for less than that but the car is worth at least that much. For instance, if your car is worth $700 but sold for $300, you can still only claim $500 in deductions.
3. Fill Out Schedule A
For tax year 2016 your deduction should be listed on line 17 on Schedule A. Remember to fill out Form 8283 if you are deducting more than $500.
4. Keep Your Documentation
The IRS requires documentation of your charitable gifts so keeping meticulous records is necessary to get your tax credits.