Like many charitable contributions, a car donation tax deduction is something you are entitled to when you file your income tax forms.  You cannot owe any balance on a loan when you donate the car, and you must have the clear title to proceed with this option of getting rid of an old car.  You must file an itemized tax return in the year you claim a car donation tax deduction.  Some charities require the vehicle to be in running condition.  There can also be other restrictions for you to qualify to give them your car.  Many charities also accept RV's, boats or campers.

 

If the vehicle has a fair market value of less than $500.00 (US), the process is quite simple.  You would receive the $500.00 deduction upon filing taxes provided that it sells for $500.00 at auction.  If your car is worth more than $500.00 (US), specific criteria will be used to calculate your tax deduction.  For example, if the vehicle you donate is worth $3,000.00 (US) and it sells for $2,000.00 (US),  your deduction allowance will be the $2,000.00 the vehicle sold for at auction.  If the charity does use the vehicle for business related purposes and it is worth $5,000.00 (US), you will be able to deduct the fair market value of the car of $5,000.00.

 

The tax software programs available to self prepare your taxes have a very simple list of questions to prepare the itemized tax return, your tax advisor will also be very familiar with this type of deduction.  You must provide the proper documentation upon the submission of your tax forms.  Be sure to obtain the specific paperwork from the charity at the time you donate your car.  The receipt for the deduction is not mailed to you at year end like many tax forms, you should receive it on the day of the donation or shortly thereafter.

 

Prior to your car donation tax deduction, you may want to read the IRS Publication 4303.  This document provides detailed guidelines for the donation of a car according to the specific tax laws.

 

To make certain that the tax break you receive is legitimate, check the credentials of any charity you select.  A charity must be registered with the Internal Revenue Service to be permitted to provide the documentation for the tax deduction and allowed to accept charitable contributions.