Is there a LIMIT on my Donation?

Before we provide any details to this question.  Please realize that you need to consult your tax advisor on what the potential financial benefits would be for donating a car to charity in your case.

There is a short answer and a long answer to this one.

The short answer is YES there is a limit when you donate a car to charity.  Typically it is $500 as a minimum, and up to $5,000 when it is well documented by the charity organization through a charity car auction.  There may be a few exceptions to the rule.  But realize, these are only exceptions.

Now the long answer is this.  A few years back, many individuals were taking advantage of the system and donating clunkers and getting the full Kelly Blue Book amount refunded on their taxes.  The Government started to crack down on this and changed the law in 2005.

Look at the Old Days (prior 2004 tax calendar year)

A taxpayer could claim a deduction on their taxes a vehicle up to $5,000 accompanied by a receipt from the charity, regardless of what the charity sold it for. No reporting prerequisite on behalf of the charity.  Everything above $5,000 still required a receipt from the charity.  The charity was required to send the IRS form 8282 stating the donation details of the automobile.

Things changed in 2005 – (after 2005 tax calendar year)

A taxpayer could claim up to $500 for any motor vehicle donated to a charity such as a goodwill car donation.  The charity would then send a receipt to the taxpayer irrespective of what the charity bought it for.  A taxpayer could claim whatever quantity the donated car bought for by the charity, accompanied by IRS form 1098C accomplished by the charity, indicating the sum offered and other pertinent data from the donor. If sold for much more than $5,000 then the IRS type 8283 will be the necessary form to submit for the claim.

A taxpayer could claim reasonable industry worth (typically decided by an analysis guidebook, like KBB.com) if the charity materially improves the car or improves the car’s worth by upgrades, or restoring it to a worthwhile condition.  If determined that the auto is worth far more than the $5,000 limit from the IRS, then IRS tax form 8283 would need to be submitted with a third party appraisal report proving the improvement to the vehicle.  The Charity will be required to post IRS kind 8282 as soon as the car is bought.

WHY is this Essential?

The abuses recognized by the US government, pointed to a number of issues where taxpayers were working the system to their benefit.  Yes, this was a great loophole in the tax law for the car donation process.

It has been just over seven years since this new tax law has changed and transformed the motor vehicle donation program for the better. But through it all, organizations have still been able to benefit greatly due to the kindness of individuals as they donate their car to a good cause.  Their principal objective is to give a car to help an organization.

Isn’t that what Donating a Car to Charity is all about.

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