Car Donation Tax

In our troubling economic times, everyone is looking for a way to gain tax write-offs. One way is to receive a car donation tax write off. It is important to note, though, that you can no longer just automatically deduct the fair market value of your car donation. It depends entirely on what the car donation charity you donate your car to plans to do with your vehicle.

If the fair market value for your car is over $500 and the car donation charity decides to sell it for whatever profit it can receive to use for the services it provides to the community, you must wait until the charity makes the sale and its vehicle donation processing center sends you a notification of how much the charity makes from that sale within 30 days after the sale is completed. This is required by law of all charitable organizations that have car donation programs.

This puts the donor in the unusual position to have to wait to determine how much his or her vehicle is actually worth before claiming the tax deduction on his or her taxes. For instance, say that the vehicle is worth $2,500, but the charity only sells it for $2,000 – this means that the donor can only claim a tax deduction of $2,000, NOT $2,500.

However, if the charity plans on “significantly” using your old car donation to provide services to the community (i.e. using your vehicle to transport its workers to serve food to the hungry, etc.), the tax write off donation is for the full fair market value for your car.

This is why it is important to wait and hear exactly what the charitable organization decides to do exactly with your vehicle before you apply your car donation tax write off on your federal taxes.