DONATE YOUR CAR
To claim charitable contributions, you must itemize deductions
There are perks to donating that outdated car languishing in your driveway: The charity often picks up the car for free, and you get to support a worthy cause. And with a little work, your donation could also yield a sizable tax deduction. To maximize the tax benefits, consider these tips. PICK THE RIGHT CHARITY
To claim a deduction, you must donate to a “qualified” organization. This includes 501(c)(3) organizations, religious or educational charities. Confirm a charity’s status with the IRS’ Exempt Organizations Select Check. RESEARCH HOW THE CHARITY USES CARS This determines your deduction. Generally, if the charity: uKeeps the car: Kelley Blue Book/Edmunds. uSells the car for more than $500: Your deduction is limited to the proceeds from the sale. If your car is worth $3,000 but the charity gets only $2,500, that’s your deduction. uSells the vehicle for less than $500: You deduct $500 or the car’s market value, if it’s less than $500. So if your car is worth $450 but sells for $350, you can deduct $450. If the car is worth $800 but sells for $400, you can deduct $500.
ITEMIZE TAX DEDUCTIONS
To claim charitable contributions, including your donated vehicle, you must itemize. You can donate your car without itemizing, but you can’t claim a deduction for your car and take the standard deduction, a set amount based on your filing status.
Say your car earns a $3,000 deduction. You’d choose between taking the standard deduction — $6,350 for single filers in 2017 — or itemizing. If deductions, including the $3,000 deduction for the car, total more than the standard deduction, you should probably itemize. But if you have no other deductions, you’d be better off with the standard deduction.
KEEP GOOD RECORDS
In general, you must retain documents from the charity that include details about your donation, the car’s value and its subsequent sale. Without this, you can’t deduct more than $500. Other restrictions may apply, so be sure to consult the IRS’ guide to vehicle donation.