Just like individuals, small businesses can donate an old car to charity for a tax deduction. Your clunker may even need repairs, but some charities don’t mind a fixer-upper. The hard part about donating a vehicle to charity can be the tax deduction. Internal Revenue Service rules for deducting a vehicle are strict. You should follow them to the letter, or your good deed could turn into a headache down the road.
Where to Donate
Many charities -- some with names known around the world -- use the internet to solicit the donation of your old car to fund their work for children, animals, the arts, medicine and military veterans. Charities include UNICEF, Toys for Tots, the Salvation Army, Habitat for Humanity and the Veterans of Foreign Wars. If you prefer to keep your donation dollars closer to home, some websites list local and regional charities by state.
Strict IRS Rules
If your car is truely a clunker and barely worth the metal that makes up the frame, you won’t have to jump through so many IRS hoops. On a car valued up to $500, all you need to document your donation is your receipt from the charity and IRS Form 8283. The form should include a description of the vehicle, including the make, model, condition and mileage. If your car is worth more than $500, you must also attach Form 1098-C to your tax return. If your car’s value exceeds $5,000, the IRS requires you to get an appraisal and file it with your tax return.
Determining Your Car's Value
Most charities will sell your vehicle to turn your donation into cash. Your deduction is determined by sales price, not car valuation guides. IRS rules require that the charity provide you with the price it gets within 30 days of the sale. In a few cases, you're allowed to use car valuation guides, but even in these cases, you must use fair market value, not the highest value listed. For example, use fair market value -- not sales price -- when the charity keeps your car for its use, the charity makes repairs to the car before selling it or the charity sells your car at a discount to a low-income person.
The Mechanics of Donation
Most charities will make your donation easy by handling routine paperwork for the Department of Motor Vehicles and any required emissions tests. Some offer free vehicle pickup, whether it's running or not. If you can drive the car to the charity, it saves the organization the cost of pickup or a tow. Always transfer title to the charity. Assignment of ownership can be completed on the back of the title. Sometimes a charity asks you to leave the owner’s name blank so it can fill in the name when it sells the car. Don’t do it, as this leaves you legally responsible for the car.
source : http://smallbusiness.chron.com/donate-car-tax-deduction-65749.html
Where to Donate a Car for a Tax Deduction
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