When considering whether you want to sell your vehicle or donate it, one of the biggest factors is your car donation’s value, or tax deduction amount.
Don’t worry! This is a very common concern, and the following article will help explain what you can expect as a car donation value for your old car. In addition, there is a list of certain criterion and vehicles that might provide you with a higher car donation value.
Determining Car Donation Value
The first thing we should talk about is what a car donation’s value is today. Prior to 2005 many donors were caught taking advantage of car donations by inflating or overestimating the value of their vehicles. The IRS updated the rules and regulations to make sure that car donation values were being more fairly determined. The following are the specifics details used to determine a car donation value:
- Fair Market Value (FMV)- is the price something would sell for on the open market, alleging that the price would be agreed upon between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. (Basically, this means that the buyer and seller both know the condition of the property, in this case the car, and that each private party wants to be part of the transaction and agrees upon the price). Please note- Fair Market Value is not always going to be exactly as a “Guide Book” might suggest. FMV is based on what the vehicle sells for with factors such as condition, location, market trends, etc., and not what it is estimated at. Although “Guide Books” are very helpful in creating a fair sale price, these values are not considered official by the IRS, and in fact, can be much higher than what you can actually expect to receive for your older vehicle.
- $500 Deductions- If your car sells for less than $500, then you can claim the deduction equal to the fair market value (the sale price) up to $500. (For example, if your vehicle sells for $300 at auction, then you can claim the $300 tax deduction based off of the FMV that was created by selling the vehicle, or you can claim the $500 tax deduction offered by the IRS as a courtesy.)
- Donations Over $500- If your vehicle sells for more than $500, then the car donation value is the SALE PRICE of that vehicle. (For example, if your vehicle sells for $1,200. Then you may claim a $1,200 tax deduction).
- Tax Deduction Paperwork- To claim a tax deduction with the IRS, Cars2Charities will provide you with a donation receipt within 30 days of the sale of the vehicle. The following information will be provided:
- A standard receipt with the name, address, and federal tax ID of the charity you selected to receive the proceeds* of the donation.
- Gross Sale Price of your vehicle (Applicable to vehicles that sell for more than $500).
- Year, Make, Model, and VIN (Vehicle Identification Number)
- IRS Tax Form 1098c- with the above information and written acknowledgement that 1. the vehicle was sold to two unrelated parties through an arms-length transaction 2. The vehicle was not traded for goods or services in exchange for the donation (Applicable to vehicles that sell for more than $500).
*Proceeds refers to sale price of the vehicle less any expenses incurred during the donation process. (ie. towing, repairs, DMV fees, compensation to Cars2Charities for handling the donation, auction fees, etc.)
How to Maximize your Car Donation Value
- Choice of Charity- Make sure your choice of charity is made knowing all the facts. Many charities do not make clear where your money is being spent or even the type of cause they represent. Don’t be fooled by clever jingles or cute advertisements. Make sure you do your research.
- 501c)3) Status- The charity you select must be a 501c)3) nonprofit registered with the IRS, and in some states the Attorney General or Secretary of State. Luckily, all of the charities on Cars2Charities’ list of Causes have been carefully vetted, and if there are any problems with a particular charity, we make sure to notify donors immediately.
- Confirmation and Final Receipt- Make sure you receive BOTH a confirmation receipt upon the scheduling or pick up of your vehicle, and a final receipt containing your car donation value. Cars2Charities issues an emailed receipt upon scheduling, that way you have proof of where your donation is going. In addition and per IRS regulations, we send you a tax deduction receipt by mail or email once your donation has been sold and processed.
- $5,000+ Donations- If your vehicle sells for equal to or more than $5,000, an appraisal may be needed. Cars2Charities will inform you if this is the case, and the appraisal can be done at the charity’s expense, unless expressed otherwise by the donor. Section B of IRS form 8283 may be needed and filled out by the donor with their tax advisor.
- Vehicle Used for Charitable Purposes- If a charity is able to use your donated vehicle instead of selling it, for any reason relating to their mission, you can claim Fair Market Value. (The reason this example of FMV is different than a vehicle being sold at auction, is because there is no buyer, which means a “Guide Book” price can be used in this instance to create the donation amount)*.
- Vehicle Sold to Needy Individual- If a car is sold to a needy individual, then the donor can claim FMV based on “Guide Book” pricing. Typically, vehicles sold to someone in need would sell for far less than FMV which is why “Guide Book” prices are acceptable.
- Improvements- When a charity makes “material improvement” to a vehicle before selling it, car donation value is increased, and the donor may deduct Fair Market Value which in this case may be more than if the vehicle sold at auction without repairs. (Please note: This does not include minor repairs or standard maintenance.)
- Due Diligence- Please consult your tax professional AND the IRS to inform yourself of all rules and regulations set by the IRS concerning car donations. Cars2Charities does our best to outline and easily explain the complexities of car donations, however, it is your responsibility as a donor to be knowledgeable about any and all IRS requirements. Cars2Charites is not responsible for any misinformation stated in this article. Please refer to the following IRS Documents also listed on our FAQ page:
Current Type of Vehicle(s) for Full Tax Deduction
Although our program is specifically designed to create proceeds for charities from the sale of donations, we are more than willing to aid our charities in looking for specific vehicles they could use for charitable purposes. Below is the current type of vehicle needed by one of our charities. If the charity uses this vehicle, the donor may be eligible to claim Fair Market Value (based off “Guide Book “pricing) as a tax deduction.
Charity Looking for Utility Van/ Truck or Box Truck
*As described above, there are some instances where a donor may receive a higher car donation value. The specific vehicle the charity is looking for needs to contain the following criteria:
- Must be a utility van, truck or box truck
- Be in running, driving condition
- Must have racks, cabinet space for storage of tools and equipment, OR the ability and space to have these features installed
- Must have average or low mileage
- Must have no exterior, mechanical, or electric damage
- Must have no business/corporate markings or insignias on the exterior or interior (If it has these, they must be removed before donation).
- Must be currently registered with no outstanding debts or tickets
- Must be in or close to Southern California (If not, transportation can be arranged at the donor’s expense).
If you have a vehicle that meets the above criteria, please call 855-520-2100 and ask for Lauren Deutsch, VP. Please mention this article.
Donate Other Vehicles Directly To Charities
If you have a running driving golfcart, vehicle, van, truck or RV. These could also potentially qualify to be donated directly to a nonprofit for FMV. After the condition of the vehicle, location and transportation are the biggest qualifiers. Please call 855-520-2100 to see if your vehicle can be donationed to a nonprofit for charitable use.