Donating a used car to charity

One of the negative aspects of buying a new car is the annoyance involved with getting rid of your old car. Many individuals find the trade-in allowance offered by dealers (if any) to be well below the car's true value. But the alternative of selling the car on your own involves the expense of advertising as well as the commitment of time needed to meet with potential buyers, accompany them on test drives, negotiate a fair price, etc.

For these reasons, you may want to consider a different option for your old car: donating it to charity. Under this approach, you will be entitled to a charitable deduction equal to the fair market value of the car. The value is usually set according to the "Blue Book" listings for used cars published by the National Automobile Dealers Association. In some cases, this value will exceed the amount you could actually get on a sale. If the car is in terrible condition, however, and is worth much less than its "Blue book" value, you must use its true market value, not its "Blue Book" value.

The donation approach saves you the trouble involved with trying to sell the car. Many charities even offer the added convenience of picking up the car at your home and saving you the trip.

Proving your right to the deduction - If you donate your used car to charity, make sure you take the steps needed to substantiate your tax deduction. First, you need a written acknowledgement from the charitable organization stating that you made the donation, describing the car, and noting that the charity provided no services in exchange for it.

Second, if the value is over $500, Form 8283 must be attached to your tax return showing when and how you acquired the car and its original cost. If the value is over $5,000, special rules requiring an appraisal apply.

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