Donated a Car in 2023? Here's How to Make Sure You Get the Tax Break You Deserve

Donating a car is a great way to do good and get an old vehicle off your hands. It can also earn you a nice tax break. But there are a few things you need to do in order to get it.

Make sure you've taken the following steps before you file your tax return for 2023, or else you could find yourself in hot water with the IRS.

Make sure you give to a tax-exempt organization

Giving your car away to someone else doesn't automatically entitle you to a tax deduction. You need to give to a qualifying tax-exempt organization for it to count. You can find one of these by using the IRS's Tax-Exempt Organization Search tool.

If you give your vehicle to an organization that's not listed on that site, you unfortunately won't qualify for a tax deduction.

Keep records

You don't have to submit proof of your charitable donation with your tax return, but you need to have it available in case the IRS comes calling. If you cannot produce proof in the form of a written acknowledgement from the charity, the government may disallow the deduction.

Your proof should include at least your name, the vehicle identification number (VIN), the organization you gave it to, and the date of the donation, signed by the organization. If you received anything in exchange for your donation, record this as well. You should note that your tax deduction is reduced by the value of any items you received in return for your donation.

Find out what the charity plans to do with the car

Some charities choose to hold onto the vehicle donation to use for their own purposes. In this case, your tax deduction would be worth the fair market value of the vehicle. But sometimes, charities sell the vehicle and use the proceeds to fund their mission.

In this case, your tax deduction is typically worth the lesser of the fair market value or the amount the charity sold the vehicle for. If it sold the vehicle for $500 or less, your deduction is the lesser of $500 or the vehicle's fair market value.

Itemize your deductions

You can only earn charitable donation tax deductions if you itemize deductions for the year. This could be the right way to go if you qualify for a number of tax deductions, but it's not the best move for most people.

If you choose not to itemize deductions, you claim the standard deduction for your tax filing status. Here's a look at the standard deductions for 2023.

If you don't feel the total of all your tax deductions will exceed your standard deduction for the year, you might be better off not claiming a tax break for your vehicle donation.

Fill out Form 8283

You have to fill out IRS Form 8283 and submit it with your tax return if you decide to pursue a tax deduction of more than $500 for your vehicle donation. You'll also need a professional appraisal of the vehicle's value if your deduction is greater than $5,000.

Tax forms can be intimidating, but most online tax software can walk you through them. All you have to do is answer some questions about your donation.

If you run into any problems or you have questions about how to claim your car donation tax break, reach out to a tax professional. They can give you personalized advice on your situation, so you don't put yourself at risk of audit-worthy mistakes.