Tips When You Donate Used Cars

The point of this page is to publish occasional words of wisdom regarding donating cars to charity. I work for a reputable charity and all I can say is that when it comes to donation, knowledge of the process can save a large hassle for both the donor and the charitable organization. So join me as I try to help clear up some common misconceptions and give out what knowledge I have regarding the wonderful thing that is donation.

There are certain regulations in effect according to the IRS which should be carefully observed when making a charitable car donation.

When claiming a deduction for a car that is greater than $500 in value, it is necessary to include the charity's written record of donation (the receipt) to your tax return in the year which your vehicle was accepted for donation. Note that it is the responsibility of the charitable organization to provide the donor of a car with this receipt within 30 days of the date of car donation. However, should it occur that the receipt is received by the donor after the tax return has been submitted, it is possible to file an amended return. This way the deduction can be properly claimed for the year of donation. Be sure to attach the receipt to this amended return.

The receipt obtained from a charitable organization when you donate used cars should indicate the amount in which the donated car sold for. Usually, it is this value to be used in order to figure out the amount in which to deduct on your tax return. This is not always the case, as various expenses can be deducted from these proceeds. If the car donated is intended to be used, a claim must be specified with the intended time of use. In the case of the vehicle being used as opposed to sold, the donor may then deduct the fair market value of the vehicle, adjusted by the condition of the vehicle. In order to determine the car's fair market value, consult the IRS publications 526 - Charitable Deductions and Publications 561, "Determining the Clue of Donated Property."

It is important to note that when people donate used cars and make a tax claim, it must be done in the form of an itemized deduction. To properly determine if an itemized deduction is ideal, it is typically determined by comparing the value of your itemized claim opposed to the value of a standard deduction afforded to you for the current tax year. For help with this, consult a tax preparation professional. For those using tax return software, there are certain accommodations for this included with most software packages.

Be sure to confirm that the charitable organization accepting the donated car is a legitimate 501 (c) 3 by contacting IRS customer service and requesting Publication 78, which is a yearly published list of qualified organizations which can receive deductible donations. Some organizations not appearing in this publication can often be found on the IRS website.

Although it can sometimes appear to be an overwhelming process, the IRS rules applied when people donate used cars are available for those in search. Do not hesitate to contact either the IRS or the charity being donated to. Help save yourself the grief of any potential future tax audits or possible scam charities by asking questions and understanding the whole car donation process.