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This car was donated to charity

The Tax Advantages of Donating Your Car

A charitable car donation can be the perfect option for philanthropic individuals that don't want to mess with fixing, scrapping, or selling their old car. Anyone can experience the satisfaction of knowing their donated car is going to help a worthwhile cause.

How Do I Donate My Car?

Car donation benefits the donor at tax time as well. Sometimes the organization will receive cash from the sale of a donated car. Sometimes they might use it to charitably deliver goods, or services to the less fortunate. Other times, if a donated car is in reasonably good shape, it may be given to someone that needs a dependable vehicle to commute to and from work. If a car is in very poor condition, it might instead be sold for scrap. Either way, the charity gets a little something extra to further its cause.

Car donation center personnel are prepared to relieve owners of their rusting heaps as well as their more valuable automobiles. They can also make the process easier for the donor by arranging for pick-up of the car. Be certain that the donation center is acting as an agent of the charity. This way the charitable donation can be made with confidence that the preferred charity receives the maximum car donation benefit. Also, you can rest assured that no problems will arise by attempting to claim your car donation benefits when you file your taxes. A donated car in fair condition could be auctioned off, or put in use for charitable purposes. By utilizing the services of a car donation center, individuals can often select from many associated charities to find one that's right for them. So when it's time to part with and old ornamental yard car, or it's time to buy a new car; don't forget about the benefits of car donation.

How Do I Get A Tax Deduction For Donating My Car?

The rules regarding car donation benefits for tax purposes have changed dramatically in recent years. In 2005, a loophole around deduction limits was closed. Prior claims were made for the car's full suggested retail value. This was eventually discovered by the IRS to be a serious loss of revenue. Now, if a donated car is sold at auction through a car donation center, the donor can claim only the amount of the sale price. Unless the car is sold for less than $500, in which case the donor may claim up to the cars fair market value or $500, whichever is lower.

However, if the car is used by the charity prior to sale, a situation of intervening use comes into play, and brings with it a slightly different set of rules. A taxpayer can in this case claim the full fair market value of the vehicle, even if it is later sold at auction for less. Donors can claim the tax deduction only if the car is donated to an IRS qualified charity i.e. section 501(c)(3). In this situation the car donation center acts as an agent of the non-profit charity; meaning that any donated car is gifted to the charity. Otherwise, the car would be viewed as a gift to the for-profit car donation center, which would not be tax deductible.

Despite the recent rule changes by the IRS; car donation benefits still entice people to help the less fortunate, while being fairly compensated themselves through charitable car donation benefits. Claiming car donation benefits with the IRS will require the filing of itemized tax deductions, and filing of form 1040 with Schedule A. Professional tax assistance may be helpful, and could further simplify the process.

Last Updated: February 17, 2015