Tax Deductions For Car Donations

Looking for a way to support your favorite charity? That used car in your driveway could be a big help to the group, and you might end up with a little money in your pocket. Generous donations of this type are recognized with special tax deductions, but certain requirements can apply.

Policies regarding vehicle donations are not as straightforward as with other types of charitable contributions. The tax relief you can receive depends not only on the claimed value of your donation, but also on the way the charity uses the vehicle. For this reason, you may not know what your full tax deduction will be at the time that you make your donation.

Since 2005, changes have been made to the statutes for tax deductions applied to vehicles donated to charitable trusts. If the declared value of the donated vehicle exceeds $500, and the vehicle is placed for sale by the charitable trust, the taxpayer is limited to claiming the gross profits from the transaction.

Taxpayers wishing to benefit from such a charitable donation need to keep the following points in mind:

Itemize Your Deductions

You must itemize your deductions in order to take full advantage of tax relief available to you. If you are claiming standard education, you will not benefit from this clause.

Claiming Fair Market Value

When filing your tax return, be sure to deduct the fair market value of the vehicle. This amount will take into consideration the condition of the donated vehicle. Claiming the full value of the car is not acceptable.

Estimate the Fair Market Value

When determining the value of your car, there are various factors to consider. You can use an up-to-date used car guide for fairly precise instructions to evaluate your vehicle's value. Some adjustments may be needed to reflect the accessories, mileage and other indicators of the general condition of the vehicle.

Verify the Eligibility of the Organization

Not every charitable organization is recognized by tax law, and you can only receive the benefit if the charitable trust qualifies with the tax department. Obtain a copy of Publication 78 at your local library or online, and see if your charity is listed.

File the Charitable Contribution Deduction

Keep good records when claiming a tax deduction for your vehicle donation. Store all receipts and forms relating to the car donation, and a copy of its fair market value, in a secure place.

Taxpayers in the United States who have donated a vehicle to charity can contact the IRS at 1-800-829-1040 to find out if the contribution is tax deductible. If you are afraid that someone has taken your contribution for deceitful purposes, you can speak with an appropriate state charity official at the state Attorney General's office.

Donating a spare vehicle is a very generous way to benefit your favorite registered charity. The organization will thank you, and the taxman will, too.