Donating a vehicle to charity is a very good thing to do. It does come with a car donation tax deduction which is a nice bonus, but one does need fulfill three things before receiving a car donation tax deduction.

First, you have to be itemizing your taxes. This means forgoing the standard deduction for your personal income taxes. If itemizing your taxes is new, get some advice from a tax preparer to see what information you will need to have to develop your Schedule A.

Second, the charity that you decide to donate the vehicle to will have to be a 501(c)(3) organization. This designation is the official IRS stamp of approval for a charity to be a not-for-profit that is allowed to provide tax deductible receipts for donations. Double check at the IRS web site if the charity says they are a 501(c)(3). This checking will assure you that a charity is IRS certified as a deductible not-for-profit and it cannot be overstated. Unfortunately, cars for charity fundraising has been infiltrated by scammers.

You can ask to see verification that a charity has 501(c)(3) status. It will be in the form of a letter from the Internal Revenue Service. But do not just trust whatever paperwork they put in front of you, check the status against the IRS web site. The IRS has a searchable online service to look for approved charities.

Third, dealers are barred from donating cars to charity. There is a requirement that cars are not allowed to be owned with the idea of making money from it.

Be sure to know all the requirement before donating your car. You will want all the car donation tax deduction that you can gain from it. It may be one of the biggest tax deductions of any year.

Something to take note of is that the tax regulations have changed in recent years concerning the car donation tax deduction. Use to be you could get the fair market value for the car. Using something like Kelly’s Blue Book you could list the estimated value for the car. Sadly, people took advantage and things have changed. Now, one has to list the actual sales price, which the charity will supply on the receipt for the car. Or one can opt for a standard car donation tax deduction for a value under $500 dollars.

However, there are a couple of ways that one can still claim the fair market value of a donated car.

The not-for-profit that received your donated vehicle must supply you with a letter saying that they are going to use the vehicle for a particular, stated purpose. That purpose must be clearly and explicitly explained. That purpose can also be that the charity will pass the car on to someone who needs it and that function of them passing it on fulfills the charity’s purpose.

Another option is for the not-for-profit to say they will make significant improvements to the vehicle. This route is typical for donations of an aircraft, a boat, or a recreational vehicle, should such a vehicle serve the mission of the charity. Again if this is the case, a written, statement needs to provided to the donor to get a car donation tax deduction.

The provided letters need to have your, the donor’s, name, Tax Identification Number (or Social Security Number), date, and the vehicle’s identification number. However, the IRS provides Form 1098-C – Contributions of Motor Vehicles, Boats, and Airplanes, that can be used instead of the written statements. Form 1098-C can serve as the car donation tax deduction written statement.

Finally, a good not-for-profit will deliver you another IRS form -Form 8283 (Non-cash Charitable Contributions). This can serve as your receipt that again should be delivered to you within thirty days.